Sri Lanka UDA Debenture Issue Closes after Rs11bn Bids

28th September 2010, www.island.lk

The UDA’s Rs. 5 billion debenture issue to raise funds for the resettlement of 65,000 families living in unauthorised constructions in Colombo was oversubscribed yesterday with managers to the issue state banking giant Bank of Ceylon deciding to close subscription after bids applications amounting to almost Rs. 11 billion were received. The bid was open until subscriptions amounting to Rs. 10 were received.

Bank of Ceylon Chairman Dr. Gamini Wickremasinghe told The Island Financial Review that the issue was closed four days from opening after strong investor demand.

"Thirty percent of the issue was open to foreigners while local investors too showed a lot of interest with many of them coming in at the final stages. We could not accept their applications because by late afternoon we had decided to close the issue," he said.

Dr. Wickremasinghe said that local investors would get a good deal by investing in the five year debentures, as deposit interest rates, already low, could come down further during the months ahead.

Investors had three investment options: the first pays a gross return of 11 percent with interest paid annually, the second option pays a gross return of 10 percent with monthly interest payments while the third option has a floating rate of interest at the Treasury bill rate + 0.75 percent with interest paid bimonthly.

"These five year debentures would be better than fixed deposits and benefit those who rely on monthly interest income," Dr. Wickremasinghe said.

Bank of Ceylon Deputy General Manager P. A. Lionel told The Island Financial Review that applications had amounted to Rs. 9.4 billion last morning (28) after totalling 8.2 billion the previous day (27).

The UDA would use the funds to build housing units for 65,000 families within the next three and half years. The land, freed from this exercise, would be leased out for commercial and development activities.

Related Info:
Sri Lanka's UDA Debentures Open on Sept 23. 30% of Rs 10bn 5yr Bond Open to Foreign Investors