Sri Lanka raises $1bln through new bond issue

The Central Bank of Sri Lanka (CB) said on Tuesday it has raised US$ 1 billion through a 5-year International Sovereign Bond (Issue) at a yield of 6 per cent per annum.

The issue was announced on January 6 with an initial price guidance of 6.25 per cent per annum. With the firm support from investors, the order books grew steadily, allowing Sri Lanka to price the issue at a yield of 6 per cent in spite of the rising benchmark US Treasury yield. "This tighter yield reflects the continued confidence that the international investors have placed in the sovereign bond issuance of Sri Lanka," the bank statement said.

The final order books stood at $3.2 billion, an oversubscription ratio of 3.2 times, from 200 accounts, achieved within an "eighteen hour bookbuild period". The issue represents the sixth US Dollar benchmark offering in the international bond markets by Sri Lanka since 2007 and the first Sovereign Bond issue in the international capital markets in 2014. Citigroup, HSBC, Standard Chartered Bank and UBS acted as Joint Lead Managers/Bookrunners on the transaction. "Post announcement of the transaction, Sri Lanka conducted a series of fixed income investor update through Internet based presentations and conference calls covering Asia, Middle-East, Europe and the USA," the statement said.

Fitch Ratings, Moody's Investors Service and Standard and Poor's rated the issue at 'BB-', 'B1' and 'B+', respectively. Fund Managers were the largest investors in the transaction, representing 89 per cent, with banks and private banks taking 8 per cent and 3 per cent, respectively. In a separate statement, Patrick Gallagher, CEO HSBC Sri Lanka and Maldives said, “HSBC is extremely delighted to have supported the Central Bank of Sri Lanka, in issuing the first sovereign bond in the international capital markets in 2014 and Sri Lanka's sixth overall. Counting over 120 years in Sri Lanka, we are the only bank to have consecutively partnered the Government of Sri Lanka on all of its sovereign bond issuances since 2007. HSBC has been consistently ranked as the No.1 Debt Capital Markets bookrunner in Asia and this bond is a testament to the ability that we have in closing large capital market transactions, and manifests our strong and continued commitment to the country.”

Colin Pawley, Standard Chartered’s Head of Origination and Client Coverage, commenting on the Bond Issue said: “The issuance is priced at a yield of 6.00%, inside the theoretical fair value for a new 5 year USD bond based on secondary trading levels of the Sovereign’s previously issued bonds. We expect to see a number of Sri Lankan Corporates issue similar Bonds in 2014 and this landmark issuance will help pave the way for them to tap the international capital markets.”