$ 45 m Development Bond issue draws $ 100 m in bids

Tuesday, 20 March 2012 00:26 - - {{hitsCtrl.values.hits}}

The Opposition may say the Government isn’t credit worthy given mounting problems but the latest issuance of Sri Lanka Development Bonds (SLDBs) worth $ 45 million had triggered an oversubscription by two times.

The SLDB offer was on the basis of $ 35 million in three year tenor and $ 10 million via four year tenor at a rate of US Dollar six month LIBOR plus a margin to be determined through competitive bidding. When the eight-day offer closed yesterday, the Central Bank said it was oversubscribed by 2.2 times with total bids received amounting to $ 100 million by both foreign and local commercial banks.

“In view of the high demand by investors, the government decided to accept $ 72 million in three year maturity and $ 12 million in four year maturity at the market determined rates of US Dollar six month LIBOR + 385 bps (weighted average margin) and six month LIBOR + 415 bps (weighted average margin), respectively,” the Bank said. The US dollar six month LIBOR (London Interbank Offer Rate) stood at 0.74 per cent, on Monday.

In comparison to the last SLDB issue, the oversubscription rate is better though rates are costlier especially the four year tenor considering the market conditions.

The August 2011 SLDB offer was $ 125 million and drew bids worth $ 166 million. The June 2011 issue of $ 275 million attracted $ 289.1 million in bids whilst a year ago, the SLDB offer of $ 185 million drew $ 204.25 million. The best success for the Government came in July last year when its $ 1 billion 10 year Bond drawing bids worth $ 7.5 billion.

As in the recent past the latest SLDB issue was executed in terms of Section Two (a) and Two (c) of the Foreign Loans Act No. 29 of 1957 as amended. Settlement date of the SLDBs for subscribed investors is 26 March.

The SLDBs are transferable by endorsement, delivery and registration with the Superintendent of Public Debt of the Central Bank of Sri Lanka. Eligible investors may purchase SLDBs in the secondary market through Designated Agents appointed by the Central Bank of Sri Lanka.