CB raises $ 116 m to
part settle $ 125 m
maturing foreign debt

* Says big draw for Development Bonds at competitive rates reflects the growing investor confidence
* Foreign investments in rupee denominated Treasury bonds and Treasury bills rise by $ 190 million during the past 10 weeks

The Central Bank last week raised US$ 116 million via two year Development Bonds at what it described as “competitive rates” to part settle US$ 125 million of maturing foreign borrowing as of June 15.
On behalf of the Government, the Central Bank offered Sri Lanka Development Bonds (SLDBs) to eligible investor categories for subscription at a rate of US dollar 6 month LIBOR plus a margin to be determined through competitive bidding. The offer was opened on June 15, 2009 with the settlement on June 29 ,2009. The Bonds on offer amounted to $ 50 million for a 2 year maturity period.
The Bank said the offer was substantially oversubscribed by both foreign and local commercial banks, with the total bids received amounting to $ 118 million (236% of the sum offered).
Of such bids, the Government has decided to accept $ 115.8 million of 2 year SLDBs at the market determined rate of $ 6 month LIBOR + 4.97% (weighted average margin). Today, the $ 6 month LIBOR rate is 1.16%.
This SLDB issue is within the annual borrowing limit approved by Parliament for 2009 and a sum of US$ 50 mn mobilised through this bond issuance is to be used to settle the SLDBs that are maturing on that date. The Bank said the excess fund mobilisation of about $ 66 mn through this SLDB issue would limit government requirement of new external foreign currency commercial borrowings during 2009. Further, it would replenish the foreign currency reserves of the Central Bank, part of which was used to settle foreign currency commercial loan obligation of $ 125 million on 15th June 2009.
“The oversubscription and decline of the margin of this SLDB issue, compared to the last SLDB issuance in March this year and the increase in foreign investments in rupee denominated Treasury bonds and Treasury bills by Rs 22 billion (US$ 190 million) during the past 10 weeks clearly reflects the growing investor confidence in the Government of Sri Lanka after the dawn of the new era in the country, as a result of the ending of the 30 years terrorist conflict,” the Bank said.