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Govt. goes for $ 1 b Foreign Currency Term Financing Facility

Comments / {{hitsCtrl.values.hits}} Views / Thursday, 29 December 2016 08:05


  • PM’s Ministry of National Policies and Economic Affairs invites Request for Proposals from local and global banks and investment houses
  • Submission to External Resources Dept. by 20 January
  • Funds to be used to meet import expenses of development projects specified in 2017 Budget


The Government yesterday announced a maximum of $ 1 billion Foreign Currency Term Financing Facility (ETFF) to meet import expenses of development projects specified in the 2017 Budget.

The facility is expected to be raised at a fixed or floating rate linked to the $ 6 month LIBOR with a maturity period of three years or more.  The Request for Proposals from local and international banks and investment houses was issued by Prime Minister Ranil Wickremesinghe’s Ministry of National Policies and Economic Affairs on behalf of the Government. Proposals from credit rated banks and investment houses are to be submitted to External Resource Department by 20 January 2017. They can submit proposals in multiple of $ 50 million, up to a maximum of $ 1 billion, on a standalone basis or collectively.  

A Reuters report said Finance Minister Ravi Karunanayake in the 2017 Budget announced Rs. 567 billion worth of infrastructure investment, 47% higher than what the Government had allocated for this year.

The Government has also planned to borrow a maximum gross foreign borrowing of Rs. 450 billion next year, 17% lower than this year’s Rs. 540 billion.

“The timing is fine for the moment as the global market has priced in the recent policy rate hike,” Ceylon Chamber of Commerce Chief Economist Anushka Wijesinghe was quoted saying.

“In the event the U.S. Federal Reserve tightens the interest rates again, any foreign borrowing could be risky.”

Sri Lanka last raised $1.5 billion via a dual-tranche international sovereign bond issuance successfully in July. This was handled by the Central Bank and comprised of $ 500 million 5.5-year and $ 1 billion 10-year International Sovereign Bonds. That marked Sri Lanka’s 10th US Dollar bond issuance and the first dual-tranche offering.

Orders totaled $ 2.5 billion for the 5.5-year tranche and 3 billion for the 10-year tranche. Both the 5.5-year and 10-year tranche were priced well inside the initial price guidance of 6.125% area and 7.125% area, with a coupon of 5.750% and 6.825% at par, respectively. After the issue closed, the Central Bank said the success was a testament to investors’ continued confidence in Sri Lanka and their positive sentiment on the economic outlook of Sri Lanka.

Driven by high quality institutional accounts globally, both the 5.5-year and 10-year tranche attracted orders from over 200 accounts each. The 5.5-year tranche saw allocations of 35% to the US, 37% to Europe, and the remaining 28% to Asia. By investor type, the split was 85% to fund managers, 8% to insurance and pension funds, 3% to banks, and 4% to private banks. The 10-year tranche saw allocations of 62% to the U.S., 28% to Europe, and the remaining 10% to Asia. By investor type, the split was 91% to fund managers, 7% to insurance and pension funds, 1% to banks and 1% to private banks.

Citigroup, Deutsche Bank, HSBC and Standard Chartered Bank acted as the Joint Lead Managers and Book runners of this successful transaction.

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