28 September 2010

$6.3bn Orders for $1bn 10yr Sri Lanka Dollar Bonds

27th September 2010, www.bloomberg.com, By Anusha Ondaatjie and David Yong

Sri Lanka received more than $6.3 billion of orders for a global sale of $1 billion in bonds to help repay debt and rebuild after the end of three decades of civil war.

The October 2020 securities were sold to yield 6.25 percent, or 373 basis points more than similar-maturity U.S. Treasuries, according to data compiled by Bloomberg. The securities were marketed to investors at an indicative yield of 6.5 percent, according to two investors briefed about the sale. Bank of America Corp., HSBC Holdings Plc and Royal Bank of Scotland Group Plc managed the issue, assisted by Bank of Ceylon.

“They came in against a positive backdrop for emerging- market bonds,” said Jetro Siekkinen, a money manager in Helsinki at Aktia Asset Management, who oversees $7.8 billion bonds and bought some of the new debt. “The spread is attractive in this yield-hungry environment.”

Global investors plowed a record $27.9 billion of funds into emerging-market debt this year through Aug. 25, according to Barclays Capital Plc, citing data compiled by EPFR Global. Dollar debt sold by developing nations has rallied 13 percent this year, JPMorgan Chase & Co’s EMBI Global Index shows.
GDP, Stock Gain

Sri Lanka’s gross domestic product expanded 8.5 percent in the three months ended June 30 from a year earlier, the most since 2002, the statistics department said Sept. 16. The $42 billion economy may grow as much as 8 percent in 2010, the central bank said Sept. 21, having previously forecast a 7 percent expansion.

The Colombo All-Share Index of shares has more than tripled since the end of a 26-year civil war in May 2009, the best performance among benchmark stock indexes. The local rupee has strengthened 2.7 percent to 111.90 per dollar over the same period, according to data compiled by Bloomberg.

The central bank said in a statement today the oversubscription reflected “high global investor confidence based on the recent progress and the future prospects in the Sri Lankan economy since the end of the conflict.”

The bank said orders were received from 362 investors globally, with 85 percent of the bonds allocated to fund managers and the balance going to pension funds, insurance companies and banks.

S&P upgraded Sri Lanka’s credit rating one level to B+ from B on Sept. 14, four levels below investment grade. Fitch raised its rating outlook to positive from stable on Sept. 21. The latest debt sale is Sri Lanka’s third global offering, following $500 million issues of five-year bonds in October 2007 and October 2009.

Sri Lanka’s debt has returned 42 percent since May 18, 2009, according to JPMorgan Chase & Co.’s EMBI Global Index. That’s when government forces defeated Tamil Tiger rebels. The return compares with a 19 percent gain in China, 24 percent in Brazil and 27 percent in Russia.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Gabrielle Coppola in New York at gcoppola@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.

Related Info:
Sri Lanka Dollar Bond Receives Bids over $2.5bn at Likely Yield of 6.375pct

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