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Central Bank said yesterday it raised US$ 166 million (around Rs. 18 billion) via a mixed Sri Lanka Development Bonds (SLDB) issue which was successfully concluded.
The Government originally offered SLDBs of $ 75 million in 3-year tenor and $ 50 million in 4-year tenor were offered for subscription at a rate of US Dollar 6 month LIBOR plus a margin to be determined through competitive bidding.
The offer was opened from 04 – 11 August 2011 for bidding with the settlement on 18 August 2011. Both foreign and local commercial banks and institutional investors subscribed bids at the auction.
“As some investors expressed their willingness to invest US Dollars 55 million for a 5-year tenor, the Government decided to accept US Dollars 81 million in 3-year maturity and US Dollars 30 million in 4-year maturity at the market determined rates of US Dollar 6 month LIBOR + 365 bps (weighted average margin) and 6 month LIBOR + 375 bps (weighted average margin) respectively, and US Dollars 55 million in 5-year maturity at a rate of 6 month LIBOR + 390 bps. Today, the US Dollar 6 month LIBOR rate is 0.44 per cent,” Central Bank said.
The successful completion comes weeks after the Government in late July concluding a highly successful $ 1 billion 10 year Sovereign issue which drew $ 7.5 billion demand reflecting an oversubscription by 7.5 times giving a major boost.
On the back of overwhelming support with orders from 315 accounts globally, Sri Lanka succeeded in pricing the issue to yield 6.25%.
Investor distribution was very well diversified, with Asia taking 27%, Europe 30% and the US at 43%. Fund Managers were the largest investors in the transaction, representing 86%, with Banks/Private Banks taking 8%, Corporates 3% and Insurance companies 3%.
This transaction represents the fourth US Dollar benchmark offering in the global bond markets by Sri Lanka since 2007. Bank of America Merrill Lynch, Barclays Capital, HSBC and the Royal Bank of Scotland acted as joint bookrunners and joint lead managers on the transaction. Bank of Ceylon acted as the co-manager on the transaction.
Fresh success...
Prior to 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. During the roadshow, Sri Lanka achieved a credit ratings upgrade by Fitch to BB-, and both the Moody’s and S&P ratings were improved to positive outlook.
With a positive backdrop from the rating agencies, strong support from investors and a positive window of execution in the market, Sri Lanka announced its USD transaction during the Asia morning on 20 July, 2011. Initial price guidance was set at 6.5% (area) for a 10-year benchmark size issue. The transaction enjoyed strong momentum, with order books growing rapidly, allowing Sri Lanka to tighten the final price guidance to 6.25 – 6.375% for a deal size of US$ 1.0 billion.
The SLDB issue this week was executed in terms of Section 2 (a) and 2 (c) of the Foreign Loans Act No. 29 of 1957 as amended.
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.
