SL’s $ 2 b Bond issue draws big demand

President Maithripala Sirisena	Prime Minister Ranil Wickremesinghe

• $6.2b total subscription highlights global confidence in SL says Central Bank
• $500m 5-year bond and longest tenor issuance $1.5 b10-year bond sold
• Gets 6.35% on 5-year tranche and 7.55% on 10-year tenure
• 50% of 5-year tranche snapped up European, Middle East and Africa investors,  30% by US and 20% by Asian funds
• 44% of 10-year tranche bought by US fund managers, 40% to EMEA, and remaining 16% to Asia
• Funds to be used to bolster reserves and refinance debt
  
   

The Central Bank yesterday said it has raised a $2 billion international sovereign bond to bolster reserves and refinance debt, which was oversubscribed three times and received most interest from fund managers in the US and Europe.

On Monday, the Central Bank, on behalf of the Sri Lankan Government, returned to the US Dollar bond markets, successfully pricing a new issuance of $500 million five-year and $1.5 billion 10-year senior unsecured fixed rate bonds with maturity dates of 28 June 2024 and 28 March 2030, respectively. 

The bonds have been rated ‘B2’, ‘B’ and ‘B’ by Moody’s Investors Service, Standard and Poor’s and Fitch Ratings, respectively.

“This represents Sri Lanka’s 14th US dollar benchmark offering in the international bond markets since 2007, and its second transaction this year. The long 10-year tranche marks the longest tenor issuance to date in the international market, underlining the international investor community’s continued support for Sri Lanka and their confidence in the country’s economic fundamentals and long-term growth prospects. Also, the long 10-year tranche has been appropriately defined in line with Sri Lanka’s future debt service obligations and debt management strategy,” the Central Bank said in a statement.

BOC International, Citigroup, Deutsche Bank, HSBC, J.P. Morgan, SMBC Nikko and Standard Chartered Bank acted as the Joint Lead Managers and Bookrunners on the successful transaction.

Capitalising on the conducive market backdrop, Sri Lanka announced the transaction during the Asia morning of 24 June. The joint syndicates released terms and initial price guidance for new five-year and long 10-year tranches at 6.60% area and 7.80% area, respectively. 

The transaction saw strong interest from a wide range of high quality investors, which allowed the Republic to tighten final price guidance to 6.40% (+/- 5bps) on the five-year tranche, and 7.60% (+/- 5 bps) on the long 10-year tranche. 

The bonds eventually priced at the tighter end of the range during New York hours, with a yield of 6.35% and 7.55% for the new five-year and long 10-year tranches, respectively, representing price tightening of 25 bps from initial guidance, for each of the tranches.

The final orderbook stood at over $1.8 billion across 165 accounts for the five-year tranche and over $4.4 billion across 290 accounts for the long 10-year tranche, reflecting total subscription of $ 6.2 billion, which is over three times over subscription, clearly highlighting global investors’ continued confidence in Sri Lanka and their positive outlook on Sri Lanka’s economic growth story.

The orderbook was well diversified across both tranches. The five-year tranche saw allocations of 30% to the US, 50% to Europe, the Middle East and Africa (EMEA), and the remaining 20% to Asia. By investor type, the split was 80% to fund managers, 9% to insurance, pension funds and corporates, 8% to bank treasury, and 3% to private banks and other investors. 

The long 10-year tranche saw allocations of 44% to the US, 40% to EMEA, and the remaining 16% to Asia. By investor type, the split was 87% to fund managers, 6% to insurance, pension funds and corporates, 5% to bank treasury, and 2% to private banks and other investors.