Sri Lanka completes largest sovereign bond offering raising US $ 2.5bn

Sri Lanka last week successfully completed its largest bond offering so far, marking its return to the international bond market.

The Central Bank said, on behalf of the Sri Lankan government, it issued US $ 1.25 billion five-year and US $ 1.25 billion 10-year senior unsecured fixed rate notes, with maturity dates of April 18, 2023 and April 18, 2028, respectively.

The notes have been rated B1, B+ and B+ by Moody’s Investors Service, Standard and Poor’s and Fitch Ratings, respectively.

“This marks Sri Lanka’s 12th US dollar benchmark offering in the international bond markets since 2007. This also represents the largest offshore bond offering ever by Sri Lanka and is a strong reflection of the international investor community’s continued support for Sri Lanka through the years,” the Central Bank said.

Identifying a supportive issuance window in a challenging market environment, Sri Lanka announced the transaction during the Asia morning of April 11, 2018.

The joint syndicates released terms and initial price guidance for new five-year and 10-year tranches at 6.00 percent and 7.00 percent areas, respectively.

According to the Central Bank, the transaction saw strong interest from a wide range of high-quality investors, which allowed the issuer to tighten the price guidance by 25 bps each across both tranches.

“The notes eventually priced during New York hours, well inside the initial price guidance with a coupon of 5.75 percent and 6.75 percent for new five-year and 10-year tranches, respectively.”

The final order book stood at US $ 3.0 billion across over 235 accounts for the five-year tranche and US $ 3.5 billion across over 190 accounts for the 10-year tranche.

“This clearly reflects investors’ continued confidence in Sri Lanka and its economic outlook,” the Central Bank said.

The five-year tranche saw allocations of 66 percent to the US, 24 percent to Europe and the remaining 10 percent to Asia. By investor type, the split was 92 percent to fund managers, 5 percent to insurance and pension funds, 2 percent to banks and one percent to private banks.

The 10-year tranche saw allocations of 65 percent to the US, 29 percent to Europe and the remaining 6 percent to Asia. By investor type, the split was similar to the five-year tranche i.e. 92 percent to fund managers, 5 percent to insurance and pension funds, 2 percent to banks and one percent to private banks.

Citigroup, Deutsche Bank, HSBC, J.P. Morgan and Standard Chartered Bank acted as the joint lead managers and bookrunners.