SL plans another US$ 1bn sovereign bond issue

22 June 2012 05:32 am Views - 3769

The Central Bank of Sri Lanka yesterday said that on behalf of the Sri Lankan government, it is planning to sell sovereign bonds worth up to US$ 1 billion, which is most likely to be utilized for the redemption of the country’s first-ever sovereign bond in 2007, which matures in October, this year.

The bank also said that it has selected four global banks- Bank of America, Merrill Lynch, Barclays Capital, Citibank NA and Hongkong and Shanghai Banking Corporation Limited (HSBC), as Joint Lead Managers for the said sovereign bond issue.

It further noted that the Bookrunner and Underwriters of the bond issue would be the said international banks and in addition, People’s Bank has been selected as the Co-manager to work with the four Joint Lead Managers on matters relating to the proposed bond issue.

However, the Central Bank in its statement did not mention about the maturity period of the bond and noted that it will be issued to international capital markets at an ‘appropriate maturity’.

The issue will be Sri Lanka’s fifth sovereign bond since its maiden US$ 500 million five-year sovereign bond in October 2007.

Quoting Central Bank Governor Ajith Nivard Cabraal, Reuters said that the monetary authority will be guided by the Joint Lead Managers on timing of the issuance.

“Our previous bonds are trading at lower than the price they were sold. So, we will be naturally guided by them,” he told Reuters when asked about the yield the Central Bank expects for the coming bond issue.

The announcement comes as the rupee traded near its record low of 133.60 against the dollar and traders said the proceeds may be used to stabilize the currency, which has slumped around 17 percent since November.

Talking to Reuters, Amal Sanderatne, an economist and Chief Executive at Colombo-based Frontier Research said that the bond inflow, together with a falling trade deficit “should help the currency to stabilize.”

Sri Lanka has been using the bond proceeds to finance a raft of infrastructure projects long neglected due to its protracted civil war and to retire some expensive short-term foreign debt.

The Central Bank also said that it will sell US$ 150 million worth of three-year Sri Lanka Development bonds to retire maturing securities used for development financing.

Since the war ended in 2009, there has been a resurgence in foreign investor interest in the island.

Sri Lanka sold a US$ 1 billion, 10-year sovereign bond in July 2011 priced at 6.25 percent with an oversubscription of 7.5 times.

The 6.25 percent 2021 bond, which is the most liquid among Sri Lanka’s sovereign bonds in the secondary market, was trading at 101.25/102.25 cents yesterday, which translates to a yield of 6.2 to 6 percent.