Massive draw for Lanka’s $ 1 b bond

Wednesday, 18 July 2012 01:50 - - {{hitsCtrl.values.hits}}

Sri Lanka’s $ 1 billion10-year sovereign bond launched on Tuesday saw strong demand, being oversubscribed by more than 10 times before the order book was closed, Reuters said, quoting unnamed sources close to the deal.

“As of now it has been oversubscribed by more than 10 times and we see strong demand for the bond and the price guidance is better than what we originally expected,” one source said on condition of anonymity.

The Government revised the guidance on the Bond to 5.875-6% from 6.125% amid strong demand early in the day when it opened the order book in Asia.

“It’s a very good price and it also shows the investor confidence in Sri Lanka” the source told Reuters said.

Other analysts too told the Daily FT last night that the rate was very attractive and reaffirmed the appetite for good issuances from emerging markets such as Sri Lanka.

Prior to the issue opening yesterday, Fitch Ratings said it has assigned an expected ‘BB-(exp)’ rating for Sri Lanka’s US$-denominated global bonds due 2022. “The final rating is contingent on the receipt of final documentation conforming to information already received,” it added.

The rating was in line with the Sri Lankan sovereign’s Long-Term Foreign Currency Issuer Default Rating (IDR) of ‘BB-’. Sri Lanka’s Long-Term Local Currency IDR is also ‘BB-’. The IDR Outlooks are Stable.

It is the the country's fifth sovereign bond since the Government started to tap international capital market in 2007 aiming to fund its long neglected raft of infrastructure projects. Proceeds of the latest bond issue will be used to refloat the $59 billion economy’s debut $500 million euro bond sold in October 2007 and to retire some expensive short term debt borrowed for infrastructure. On Tuesday, local currency dealers expected rupee currency to regain to 130 in the near future due to the expected inflow from the bond.

In June, the Central Bank said on behalf of the Government it was planning an issuance of an International Sovereign Bond of up to $ 1 billion in the international capital market at an appropriate maturity.

For this purpose, after evaluation of eight proposals received, the Central Bank said it selected four leading international investment banks, namely Bank of America Merrill Lynch, Barclays Capital, Citibank NA, The Hongkong and Shanghai Banking Corporation Limited as Joint Lead Managers, Bookrunners and Underwriters for the proposed sovereign bond issuance.

In addition, People’s Bank has been selected as the Co-manager to work with the four Joint Lead Managers on matters relating to the proposed Bond issuance.