The Central Bank of Sri Lanka (CBSL) recently said that it had successfully launched and priced a US$ 650 million 10-year International Sovereign Bond (Issue) at a yield of 6.125 percent per annum on 28th May, 2015.
The Issue represented the eighth US Dollar benchmark offering in the international bond markets by Sri Lanka since 2007. Citigroup Global Markets Inc., Deutsche Bank, The Hongkong and Shanghai Banking Corporation Limited and Standard Chartered Bank acted as Joint Lead Managers/Bookrunners on the transaction.
Fitch Ratings, Moody’s Investors Service and Standard and Poor’s have rated the Issue at ‘BB-’, ‘B1’ and ‘B+’ respectively. The Issue was announced during the Asia morning on May 28, 2015 with an initial price guidance of 6.375 percent per annum.
“The order books grew steadily, allowing Sri Lanka to price the Issue at a yield of 6.125 percent or a spread of 397.7 bps vs. the 10-year US Treasury. The compression in yield of 25 basis points reflects the continued confidence that the international investors have placed in the sovereign bond issuance of Sri Lanka,” the Central Bank said in a statement.
The CBSL statement further noted that the final order books stood at US$ 2 billion, an oversubscription ratio of 3.08 times, from 173 accounts.
“Distribution was very well diversified, with Asia taking 23 percent, Europe 27 percent and the US at 50 percent. Global Fund Managers were the largest investors in the transaction, representing 79 percent, with Banks, Pension Funds/Insurance and Private Banks taking 9 percent, 7 percent and 5 percent respectively.”
“With this transaction, this Issue represents the first Sovereign Bond Issue for Sri Lanka in the international capital markets in 2015, post the change in government. This Issue also succeeded in achieving a ten-year cost of funds which is inside the current Sri Lanka US$ secondary levels and at tighter spread vs. the US Treasury compared to the last ten-year Sri Lanka US$ in 2012. This achievement is all the more impressive, given the recent volatility in US Treasury yields and anticipated Fed rate hike later this year.”
Meanwhile, on the same day (May 28), CBSL issued US$ 329 million Sri Lanka Development Bonds (SLDBs) of 1 year 1 month maturity at a Weighted Average Margin (WAM) of 316.69 bps and US$ 9 million SLDBs of 2 years 11 months maturity at a WAM of 353.89 bps, over 6 month London Inter bank Offered Rate (LIBOR).
Accordingly, a total of US$ 988 million was raised via International Sovereign Bonds and SLDBs at a weighted average cost of 5.261 percent per annum.