$ 1 b bond issue most successful to date: CB

The Central Bank yesterday said that the US$ 1 billion 10-year sovereign bond issue concluded on Tuesday was the most successful to date, given the 10.5 times oversubscription and number of investors.

“The final order books stood at US$ 10.5 billion, an oversubscription ratio of 10.5 times. This is the largest order book as well as the largest number of investors in the order book for Sri Lanka ever,” the Central Bank said. The yield was an attractive 5.875% per annum.

“With this transaction Sri Lanka succeeded in achieving a cost of funds, which is progressively lower compared to the previous Issuances,” the Central Bank said.

Sri Lanka’s previous four issuances in 2007 (five-year), 2009 (five-year), 2010 (10-year) and 2011 (10-year) were priced at yields of 8.25%, 7.40%, 6.25% and 6.25% respectively.

The Central Bank said this achievement is all the more impressive, given the volatility seen in global capital markets in recent months.

“With the strong demand, the order books grew rapidly, allowing Sri Lanka to price the issue at 5.875%. This tighter yield reflects the improved confidence that the international investors have placed in the sovereign bond issuance of Sri Lanka,” the Central Bank added.

The number of investors increased to 425 from 315 in 2011. Distribution was very well diversified, with Asia taking 27%, Europe 29% and the US at 44%. Global fund managers were the largest investors in the transaction, representing 90%, with banks/private banks and others taking 6% and 4% respectively.

The latest bond issue represents the fifth US Dollar benchmark offering in the international bond markets by Sri Lanka since 2007. Bank of America Merrill Lynch, Barclays Capital, Citigroup and HSBC acted as Joint Lead Managers/Bookrunners on the transaction. People’s Bank acted as the Co-Manager on the transaction.

Prior to the 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.

Fitch Ratings, Moody’s Investors Service and Standard and Poor’s have rated the Issue at ‘BB-’ with a Stable Outlook, ‘B1’ with positive outlook and ‘B+’ with a stable outlook respectively.

With the strong support from investors and timely execution in the market, the issue was announced during the Asia morning on 17 July 2012.