US$ 44.6 m HSBC loan to fund 210 steel bridges

The Sri Lankan Government is to enter into a loan agreement with HSBC for 28.2 million pounds (about US$ 44.6 million) to fund 210 steel bridges, a Minister said yesterday.

Cabinet had earlier given approval to award the contract of 210 steel bridges to the UK company Cleveland Bridges. The latest loan from the Hong Kong and Shanghai Bank (HSBC) of UK will provide the lion’s share of the funding for this project.

An additional 6.8 million pounds (about US$ 10.7 million) will be funded by State-run People’s Bank.

The HSBC loan has a repayment period of 13 years, including a three-year grace period, while the People’s Bank share must be paid back in 14 years.

The Cabinet paper stated that negotiations have been concluded with HSBC of UK and People’s Bank to enter these agreements. The HSBC loan has an interest of six months LIBOR plus two per cent margin. The commitment fee and structuring fee charged for the loan is 0.20 per cent per annum on undrawn balance of the facility and 0.25 per cent flat on the facility amount respectively.

Meanwhile, the People’s Bank has agreed to provide the balance amount at an interest rate of interest of six months LIBOR plus 4.25 per cent margin with a two-year grace period included in the 14 years given for repayment.   

“Construction of these bridges connecting villages will facilitate great economic integration of rural communities,” Cabinet Spokesman Minister Keheliya Rambukwella told media.   

The Central Bank has stated that the entire loan of the HSBC will be used to finance importation of goods from the UK supplier and “is not likely have adverse monetary implications,” according to the Cabinet paper.