21 August 2009

Sri Lanka to call for bids from investment banks to jointly manage $500 Million of Debt Abroad

By Anusha Ondaatjie, 19th August 2009, www.bloomberg.com

Sri Lanka plans to call for bids from investment banks to jointly manage a sale of $500 million of dollar-denominated debt overseas, Central Bank Governor Nivard Cabraal said.

“The timing and structure of the issue will be decided in conjunction with the managers,” Cabraal said in a telephone interview from the bank’s Colombo headquarters.

Sri Lanka is selling debt to rebuild roads, schools and hospitals in the country’s northern region after defeating the separatist Liberation Tigers of Tamil Eelam in May. Cabraal said July 21 a $2.6 billion International Monetary Fund loan will likely improve the island’s credit rating and help make borrowing costs cheaper.

Sri Lanka’s government in 2007 sold $500 million of bonds due in October 2012 at a yield of 8.25 percent, 397.2 basis points higher than U.S. Treasuries of similar maturity. The debut overseas bond sale, which was arranged by HSBC Holdings Plc, JPMorgan Chase & Co. and Barclays Capital, drew demand for more than three times the amount on offer.

Sri Lanka tapped HSBC and JPMorgan to arrange meetings last month with investors in the U.S., India, Hong Kong and Singapore to highlight renewed prospects in the island.

The IMF’s aid package and improved investor confidence with the end of the civil war have helped attract foreign capital and eased local borrowing costs, the central bank said July 23.

Standard & Poor’s on May 21 cut the island’s rating outlook to negative from stable because of depleting foreign-exchange reserves and delays in receiving the IMF bailout. S&P rates the nation’s long-term foreign-currency debt at ‘B’, five levels below investment grade. Fitch Ratings downgraded its outlook on Sri Lanka in February.

The nation’s reserves have climbed 71 percent in four months and are above the level stipulated in the loan agreement with the IMF, the central bank said Aug. 4.

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