Lanka goes for more US, Europe investors in $ 500 m bond issue

Sri Lanka last week preferred to allocate a majority 76% of its US$ 500 million sovereign bond issue with US and European investors which analysts viewed as a positive move.

Newly appointed USA Ambassador Patricia A. Butenis met with Governor, Central Bank Ajith Nivard Cabraal at the Governor’s Office last week.

They said that such an allocation would improve the profile of Sri Lanka among investors in these developed and key markets.
The strategy also comes hot on the heels of perceived strained relationships between Sri Lanka and the West especially the US and select European countries.
Last week the Government successfully managed to close the US$ 500 million 5-year sovereign bond issue with a coupon of 7.40%.
This was Sri Lanka’s first international offering following the end of the internal conflict.
The Government will use the net proceeds from the Offering to supplement available concessional funds to develop infrastructure projects that have previously been approved by the Government and included in the current 2009 Budget.
Central Bank of Sri Lanka Governor Ajith Nivard Cabraal commented: “We are very pleased with the outcome of our latest sovereign US Dollar bond issue. The strong response signifies the heightened confidence of investors globally in Sri Lanka and the country’s enhanced growth prospects following the end of the conflict.”
“This transaction broadens our international investor base substantially and enhances Sri Lanka’s financial flexibility for the future,” Cabraal added.

The Offering attracted an orderbook that was over-subscribed by more than thirteen times one of the highest level of over-subscription of any sovereign US Dollar bond offering during 2009 year-to-date.
Orders were received from two hundred and sixty-nine (269) investors. By geography, 45% of the bonds allocated to investors in the United States, 31% to Europe and 24% to Asia. By investor type, 78% of the bonds were allocated to Fund Managers, 8% to Banks, 7% to Retail, 4% to Insurance Companies and Pension Funds and 3% to other investors.
The Offering is in 144A / Reg.S format and the bonds mature on January 22, 2015. The bonds are rated B by Standard & Poor’s and B+ by Fitch Ratings, and will be listed on the Singapore Exchange. The coupon of 7.40% is significantly lower than the coupon of 8.25% on Sri Lanka’s inaugural USD bonds issued in October 2007.
HSBC, J.P. Morgan and The Royal Bank of Scotland acted as joint lead managers and joint bookrunners on the Offering.