Sri Lanka $1 billion bond issue draws billions in offers

(July 21, Colombo, Sri Lanka Guardian) The US$1 billion bond issue of the Sri Lanka Government, offered by the Central Bank (CB), has been oversubscribed 7.5 times at $7.5 billion, the CB said today (Thursday).

CB Governor Ajith Nivard Cabraal said the strong response from the market ‘reflects high levels of investor confidence in Sri Lanka’s economy and the robust growth prospects for the country.’

“The final order-books stood at US$7.5 billion, an oversubscription ratio of 7.5 times, with orders from 315 accounts. Distribution was very well diversified, with Asia taking 27%, Europe 30% and the US at 43%. Fund Managers were the largest investors in the transaction, representing 86%, with Banks/Private Banks taking 8%, Corporates 3% and Insurance companies 3%,” the CB said in a statement.

With this transaction Sri Lanka succeeded in achieving a cost of funds more than 40 bps lower, as a margin over the US Treasury, compared to Sri Lanka’s last 10-year bond offering in September 2010, which was issued at a spread of +373.1 bps. This achievement is all the more impressive, given the volatility seen in markets globally in recent months, it said.

The 10-year global bond was priced at a fixed-rate yield of 6.25%, equivalent to a spread of +332.2 bps over the 10-year US Treasury when it opened.

The transaction represents the fourth US Dollar benchmark offering in the global bond markets by Sri Lanka since 2007. Bank of America Merrill Lynch, Barclays Capital, HSBC and the Royal Bank of Scotland acted as joint bookrunners and joint lead managers on the transaction. Bank of Ceylon acted as the co-manager on the transaction.

Prior to launch of the transaction, Sri Lanka conducted a series of fixed income investor update meetings with investors in Singapore, Hong Kong, various cities in the USA and London. During the roadshow, Sri Lanka achieved a credit ratings upgrade by Fitch to BB-, and both the Moody’s and S&P ratings were improved to positive outlook.