Sri Lanka Raises $ 1bn 10yr Sovereign Bond Riding on the Country’s Recovery Story and Positive Reviews by Rating Agencies

22nd July 2011, www.financeasia.com, By Denise Wee

Markets have hardly been conducive to new debt issues recently, but Sri Lanka took advantage of a brief calm early yesterday morning to successfully price a $1 billion 10-year global bond.

Sri Lanka is used to dealing with bigger problems than volatile financial markets, and the once war-torn country’s ability to raise such a large amount of money at a competitive yield is testament to just how far it has come since the civil war ended in 2009 — and contrasts sharply with the experience of its embattled European peers.

Bank of America, Merrill Lynch, Barclays Capital, HSBC and Royal Bank of Scotland were joint bookrunners for the deal. Bank of Ceylon acted as a co-manager.

The leads kicked off roadshows on July 11 and decided to push ahead with pricing slightly ahead of schedule as they saw a window to launch a transaction amid relatively stable markets. They released initial guidance in the area of 6.5% on Wednesday morning ahead of officials wrapping up one-on-one meetings with investors in London later that day.

During midday London time, the leads revised guidance to 6.25% to 6.375%. Momentum for the transaction continued to build and the order book reached more than $5 billion before the US opened. The bonds eventually priced at the tight end of that final guidance, offering a spread of 332.2bp over US Treasuries.

While it was on the road, Sri Lanka also received a vote of confidence from the rating agencies. Fitch upgraded its rating on Sri Lanka to BB- from B+ on July 18, citing the country’s stabilisation and economic recovery under the IMF programme, as well as its efforts to address its budget deficit. Moody’s and S&P both revised their outlooks on Sri Lanka to positive but kept their ratings at B1 and B+ respectively.

“Sri Lanka has come a long way,” said one person familiar with the deal. “We are getting bad news out of Europe on an almost daily basis, so we were pleasantly surprised when the deal was done at a coupon of 6.25%,” he added.

The deal appealed to the US emerging market and global funds, which saw rarity value in the deal. Sri Lanka tapped the market just 10 months ago, but has fewer outstanding bonds than Indonesia and the Philippines.

The final book stood at $7.5 billion, with orders from 315 accounts. US investors were allocated 43%, Europe was allocated 30% and Asia 27%. Fund managers were allocated the biggest share with 86%, banks/private banks were allocated 8%, corporates 3% and insurers 3%.

The rush of fund flows from the US into emerging market sovereigns — which started in 2009 and accelerated last year — has tapered off slightly this year as investors have turned defensive. However, Sri Lanka has shown that there is still ample demand in the US for the right credit.

Malaysia’s $2 billion sukuk global bond, in contrast, attracted a more muted response from US investors, who were allocated just 4% of the five-year tranche and 15% of the 10-year tranche.

Sri Lanka’s bonds traded at 101.5 in the secondary market yesterday morning, rising 1.5 points from the par issue price.

The deal is Sri Lanka’s second 10-year issue. The sovereign priced its debut $1 billion 10-year global bond in September last year via arrangers Bank of America Merrill Lynch, HSBC and Royal Bank of Scotland. That deal paid a similar coupon of 6.25% but offered a higher spread of 373.1bp over Treasuries. As a spread over Treasuries, Sri Lanka paid roughly 40bp less in its latest deal.

According to one person familiar with the deal, the Sri Lanka bonds maturing October 2020 were trading at a yield of 6.1% while the new bonds were being marketed. Taking into account the US Treasury yield curve, the nine-month extension was worth about 14bp. This put the theoretical value of the new 10-year bond maturing July 21, 2021 at about 6.24%, which meant that the new bonds came with hardly any new issue premium. Following the pricing of the deal, the existing Sri Lanka October 2020s rallied and were quoted at 102.5 and a yield of 5.9%.
Related Info :

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• Sri Lanka's $ 1bn 10yr Sovereign Bond May Yield 6.5pct and Expected to be Comfortably Oversubscribed

• Moody's Gives Sri Lanka B1 Sovereign Rating with a Stable Outlook

• Fitch Affirms Sri Lanka's LTIDR B+. Revised Outlook to Positive from Stable

• S&P Raises Sri Lanka’s Ratings. B+ for Foreign Currency Debt with a Stable Outlook

Sri Lanka Maintains Radio Silence ahead of US$ 1bn Sovereign Bond Issue to International Capital Markets

10th July 2011, www.island.lk

Public officials in the Central Bank and Treasury are observing radio silence ahead of the US$ 1 billion sovereign bond issue to international capital markets. This is so that Sri Lanka can observe laws as laid down by the US capital markets regulator governing such issues, preventing investors from being unduly influenced by the issuer.

According to newswire services, international banks managing the issue for Sri Lanka would hold investor meetings starting Monday, July 11, but The Island Financial Review could not confirm this with officials because of the radio silence imposed on them.

This radio silence has been observed before, and is a sign that the US$ 1 billion bond issue is at hand, but no official would comment.

As reported in these pages last week, Cabraal speaking to foreign media said Sri Lanka warranted a sovereign ratings review given the post conflict macroeconomic developments, which should give the latest bond issue a yield bordering 6 percent or lower. Fitch Ratings had recently said the ratings ‘could’ be upgraded.

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• Sri Lanka Appoints Four Banks as Joint Lead Managers to Handle Sovereign Bond Issue

• Sri Lanka Performs better than BRIC Economies. Smart Money Highlights Investing in Smaller Emerging Markets

• Sovereign Bond Investors Should Turn to Sri Lanka over Vietnam Says Nomura

Sri Lanka Appoints Four Banks as Joint Lead Managers to Handle Sovereign Bond Issue

25th June 2011, www.island.lk

Sri Lanka’s Central Bank has appointed Bank of America Merrill Lynch, Barclays Capital, Hongkong and Shanghai Banking Corp, and Royal Bank of Scotland as joint lead managers to advise and handle a future international sovereign bond issue.

The appointments were made after evaluating proposals received from seven top international banks and investment houses, a statement said.

The central bank has said it intends to sell a billion US dollar sovereign bond this year with the money to be used to help pay off debt and build infrastructure.

Central bank governor Nivard Cabraal said the bond’s tenure was likely to be 10 years.

"We don’t want to go longer because then the situation will get tighter and tighter," he told LBO Wednesday.

"We don’t want to lock ourselves to a current credit number for a longer period. Interest rates – we cannot say for sure because it will depend on the world market conditions. We would certainly expect the rate to be lower than last year."

Cabraal said he expects the bond to be well received given the island’s accelerating economic growth after the end of its 30-year ethnic war.

"There is no doubt in anyone’s mind about Sri Lanka’s performance so we do not foresee any anxiety. So it will be a fairly well received credit."

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• Upward Revision of Sovereign Ratings on Sri Lanka Expected with Favourable Recommendations from Three Major Rating Agencies

• Sri Lanka to Sell $1bn 10yr Sovereign Dollar Bond in September to Fund Infrastructure & Retire Expensive Loans. Roadshows in London/Singapore/New York

Sri Lanka to Sell $1bn 10yr Sovereign Dollar Bond in September to Fund Infrastructure & Retire Expensive Loans. Roadshows in London/Singapore/New York

10th May 2011, in.reuters.com, By Shihar Aneez

Sri Lanka plans to sell a billion sovereign dollar bond this year with a tenure of 10 years or more to retire expensive debt and fund vital infrastructure projects, the island nation's central bank said on Tuesday.

The issue will be Sri Lanka's fourth eurobond offering since it first tapped international capital markets in 2007.

"It will be $1 billion and the tenure will be 10 years or even more," Dharma Dheerasinghe, the central bank's deputy governor, told Reuters in an interview. "We are in the process of writing to investment banks and other institutional investors and the road shows will be done in June."

This issue will be used to refinance expensive debt and fund infrastructure projects. Proceeds from earlier bonds were mostly used to pay for infrastructure projects during the last years of a quarter-century civil war that ended in May 2009 and after.

In September, Sri Lanka's issued a $1 billion, 10-year eurobond yielding 6.25 percent which received $6.33 billion in offers.

That followed two $500 million, five-year bond sales, the first in 2007 and the second in 2009. Sri Lanka wants to trim its long-term borrowing costs and cut its debt-to-GDP ratio to 67 percent by 2014 from last year's 81.9 percent.

"We could go to the market even earlier than October this year," he said.

INFRASTRUCTURE DRIVEN GROWTH

Sri Lanka has allocated about $6 billion to road, railway, port, airport, and power generation projects projects that are either underway or in the pipeline, hoping to keep its $50 billion economy growing sustainably at 8 percent or more.

Sri Lanka has forecast a record economic expansion of 8.5 percent this year, from last year's 32-year high of 8 percent, despite rising inflationary worries.

"We can achieve a growth between 8.2-8.5 percent this year as the economy has the capacity to expand more with the end of the war and we are underperforming in a number of sectors," Dheerasinge said.

Sri Lanka's annual inflation jumped to a 27-month high of 9.8 percent in April from a year earlier and the annual average inflation hit a 19-month high in April, well above analysts forecast.

"Both annual average and point-to-point inflation will be below what it is now and the rise in inflation is purely due to supply constraints."

The central bank raised commercial banks' deposit requirement by 1 percentage point to 8 percent in April to try and ease potential demand-side inflation by reduce excess liquidity caused by foreign currency inflows.

"We will see a reduction in excess liquidity with the expansion of the economic activity," Dheerasinghe said. (Editing by Bryson Hull).

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• Barclays Recommends Sri Lanka’s Debt over Vietnamese Dollar Bonds with Sri Lanka's Improving Rating & Economy

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

• Sri Lanka, Mongolia & Iraq to Lead Growth States of 2050, 3G Index of Global Growth Generators of Citibank Chief Economist

• World Bank Elevates Sri Lanka’s Status to Fnding Provided to Middle Income Earning Countries. IFC Funding for Private Sector Explored

Sri Lanka Performs better than BRIC Economies. Smart Money Highlights Investing in Smaller Emerging Markets

04th April 2011, www.island.lk

The BRIC economies have been trounced by Sri Lanka’s capital market surge and vibrant economic growth, being the gateway to India and Southeast Asia, said an international investment journal published by US based Dow Jones and Company Inc.

"It’s a stat that could lead many investors to do a double take: The stock market of Sri Lanka soared 91 percent last year. But it’s true. While all the attention, and most of the money, keeps going to the so-called BRIC countries (Brazil, Russia, India and China), they were trounced by a country many think of only when there’s a bad cyclone or a civil war.

And Sri Lanka, whose economy grew 8 percent last year, isn’t alone in offering another option to investors looking for emerging markets," Smart Money said in an article titled ‘Investing in Smaller Emerging Markets’.

It said as China looked to slow down parts of its economy, strategists were turning to other parts of the world for growth. "They don’t have to look very hard. Countries in both hemispheres have seen their economies surge along with their stock markets.

Part of this strong performance can be attributed to a surge in demand worldwide for the commodities found in some of these nations. And part of it is simply a result of the global economic recovery.

In some instances, such as with Pakistan, national economies and markets have rebounded from a disastrous two years. The best news for investors: While there might be corrections, even sharp ones, these nations have good prospects, according to some pros. "There’s a multitude of opportunities in these non-BRIC markets," says Nick Chamie, global head of emerging markets research at RBC Capital Markets, as quoted by Smart Money.

It says investing in these smaller nations brings a whole set of risks that even some of the BRIC countries usually don’t face. Inflation could have a greater impact on these nations than on bigger countries because energy and, especially, food prices have a huge impact on their citizens "Nevertheless, analysts are particularly high now on four emerging economies. Sri Lanka has seen a surge in trade-related traffic as a gateway to both India and the rest of Southeast Asia," Smart Money says.

"With new country-specific exchange-traded funds having started in the past couple of years and with more on the way—Global X Funds plans to launch one of the first Pakistan ETFs this year—it’s becoming easier for investors to get direct exposure to these smaller emerging markets.

Buying a basket of them would diversify risk across several nations, in case one of their economies goes south. Funds such as the Harding Loevner Frontier Emerging Markets have investments in Sri Lanka and other smaller markets. At the same time, emerging-market bond funds offer an easy way to add the smaller nations to an investor’s portfolio," Smart Money said.

Last September, it was reported that Sri Lanka’s sovereign bonds have out performed bonds from Brazil, Russia, India and China (BRIC) in international capital markets according to a survey carried out by JP Morgan Chase and Co. "Sri Lankan debt has returned 39 percent since May 18, 2009, when the government defeated Tamil Tiger rebels, according to JP Morgan Chase & Co.’s EMBI Global Index. That compares with 12 percent in China, 22 percent in Brazil and 26 percent in Russia. Company bonds of India, which doesn’t have a dollar-sovereign issue, delivered gains of 26 percent," it said in a Bloomberg newswire report.

"Demand for bonds from countries like Sri Lanka is still high," said Milan-based Francesca Di Cesare, who helps oversee $10 billion of assets including 2015 Sri Lankan debt at Aletti Gestielle SGR SpA, as quoted by Bloomberg newswire, "Investors struggle to find this paper."

The Colombo Stock Exchange has grown 11.7 percent from January 1 to April 1. Net foreign outflows amounted to a little more than Rs. 6.9 billion but Director General of Securities and Exchange Commission, Malik Cader, recently said foreign funds were not leaving the country, they were only exiting the stock exchange.

Inflation rose to 8.6 percent as food prices increased 7 percent.

The country’s bond market is relatively inactive for the moment with no buying interest with high inflation expectations.

Sri Lanka is confident its sovereign ratings would be upgraded this year and discussions with international sovereign ratings agencies Fitch, Moody’s and Standard and Poor’s, are expected to commence this month. Sri Lanka has strong macroeconomic fundamentals, and the International Monetary Fund (IMF) said it was happy with the progress made by Sri Lanka under a US$ 2.6 billion standby facility arrangement.

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Sri Lanka to Roll Over $500mn Development Bonds Maturing this Year

09th February 2011, www.dailynews.lk

Sri Lanka is likely to roll over $ 500 million worth of two-year development bonds borrowed to fund a raft of infrastructure projects, the Central Bank said on Tuesday.

The Central Bank's public debt department said $184 million in development bonds will mature in March, followed by $ 126 million worth in June and $ 190 million worth in August.

"There are $ 500 million worth' of development bonds maturing this year and they are likely to be re-issued," Central Bank official told Reuters.

The decision must be finalised by the Finance Ministry, he said.

Sri Lanka has so far borrowed $ 1.5 billion through development bonds mainly to fund the $ 50 billion economy's long-neglected infrastructure projects since the ending of a 25-year war.

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Sri Lanka to Sell 10yr Sovereign Bonds upto $1bn in 2012

22nd December 2010, www.dailynews.lk

Sri Lanka may sell up to $ one billion in a 10-year sovereign bond in 2012, the year when the island's debut $ 500 million dollar bond matures, Central Bank Governor Ajith Nivard Cabraal said on Tuesday.

"We may sell a sovereign bond in 2012. We are looking longer tenure of at least 10 years and a size of between $ 500 million to $ one billion," he told Reuters, after a tour of the former northern war zone in Mannar.

The amount will be decided according to the requirement of that time.

"Our spreads are getting tighter now. So we can raise money at a cheaper rate than the debut bond. We can also manage the repayment of the debut bond in 2012 without much pressure," he said.

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Barclays Recommends Sri Lanka’s Debt over Vietnamese Dollar Bonds with Sri Lanka's Improving Rating & EconomyBank

Sri Lanka Sovereign Strategy Brings Results, Says Central Bank

Barclays Recommends Sri Lanka’s Debt over Vietnamese Dollar Bonds with Sri Lanka's Improving Rating & Economy

17th December 2010, www.bloomberg.com

Investors should sell Vietnam’s 10- year dollar bonds and buy Sri Lankan debt after Moody’s Investors Service cut the Southeast Asian nation’s credit rating, according to Barclays Plc.

Moody’s lowered Vietnam’s long-term foreign-currency rating to B1, four levels below investment grade, from Ba3 on Dec. 15. The ratings company cited the risk of a balance of payments crisis, a drop in foreign reserves, quickening inflation and the weakening dong for the assessment. Concern about what policy directives the ruling Communist Party will take at its 11th National Congress next month also reduces the debt’s appeal, Barclays analysts wrote in a research report today.

“We believe there should be more clarity on the policy direction for growth, inflation and the currency when the National Congress has completed,” according to the report headed by Singapore-based economist Prakriti Sofat.

Barclays is recommending Sri Lanka’s debt because it says the country’s rating may be upgraded due to improvements in the budget and the balance of payments. The nation is rated B1 by Moody’s and that may be raised by one level next year, a separate Barclays report said last week.

“We remain constructive on the Sri Lankan sovereign given its gradually improving budget position, upbeat growth outlook, robust balance of payments and rising foreign-currency reserves,” Sofat wrote.

Yield Premiums
The yield on Vietnam’s 6.75 percent dollar-denominated note due January 2020 has climbed 21 basis points since the Moody’s announcement to 6.31 percent as of 1:35 p.m. in Hanoi, according to prices from the Royal Bank of Scotland Group. That’s the highest level since July. The yield on Sri Lanka’s 6.25 percent U.S. currency bond due October 2020 has advanced 14 basis points in the same period to 6.25 percent, RBS prices show.

The extra yield investors demand to hold Vietnam’s debt over U.S. Treasuries widened 38 basis points to 279 yesterday, according to JPMorgan Chase & Co.’s EMBI Global Diversified Sovereign Spread Index. For Sri Lanka, the premium climbed 13 basis points to 260, near a record low of 247 reached on Dec. 15.

The cost of protecting Vietnam’s sovereign bonds from default for five years has increased 24 basis points this week to 286, according to CMA prices.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

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Sovereign Bond Investors Should Turn to Sri Lanka over Vietnam Says Nomura

Sovereign Bond Investors Should Turn to Sri Lanka over Vietnam Says Nomura

06th October 2010, www.bloomberg.com

Sovereign bond investors should buy debt of Sri Lanka over Vietnam as the island nation progresses in setting aside three decades of war to record economic growth that outpaces its rival, according to Nomura Holdings Inc.

“Sri Lanka has become the new darling of the Asian emerging-market space,” credit analysts led by Hong Kong-based Pradeep Mohinani wrote in an Oct. 5 note to clients. The nation is the “the sovereign story in Asia to dislodge Vietnam, which has lost its allure,” he said.

The island nation south of India, recovering from civil unrest, last month attracted more than $6.3 billion of orders for a $1 billion global bond sale. The October 2020 notes were sold to yield 6.25 percent, or 373 basis points more than similar-maturity U.S. Treasuries. The spread has since narrowed 15 basis points to 358 basis points, according to Nomura. A basis point is 0.01 percentage point. Narrowing spreads indicate rising bond prices.

Sri Lanka’s $42 billion economy expanded 8.5 percent in the three months to June 30 from a year earlier, the most since 2002, its statistics department said Sept. 16. The economy may grow as much as 8 percent this year, more than a previous forecast of 7 percent, the central bank said last month.

“The country clearly has the tailwinds behind it,” Mohinani wrote. “We expect the entire Sri Lanka curve to converge to the Vietnam curve in due course,” he said, referring to movements in benchmark yields.

Vietnam Rates

In Vietnam, banks were asked this week to cut deposit rates to no more than 11 percent in an effort to spur growth in the $92 billion economy. The nation’s gross domestic product may expand 6.7 percent this year, Nguyen Xuan Phuc, chairman of theGovernment Office said on Sept. 30.

The $1 billion of January 2020 bonds sold by Vietnam’s government in January pay a coupon of 6.75 percent and were issued at a spread of 332.7 basis points more than similar- maturity Treasuries, according to data compiled by Bloomberg. They’re now trading at a spread of 292 basis points, having narrowed 41 basis points, Royal Bank of Scotland Group Plc prices on Bloomberg show.

Dollar bonds in Vietnam returned 7 percent last quarter compared with 6 percent for dollar debt in Sri Lanka, JPMorgan Chase & Co. indexes show.

To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net

Sri Lanka $1bn Bond Issue Closes in 14 Hours Attracting $6.3bn Bids

28th September 2010, www.island.lk

* 362 investors throw in more than US$ 6.3 billion

* Yield at 6.25 percent, lower than issues in 2007, 2009

Central Bank’s Public Debt Department Superintendent C. J. P. Siriwardena said the global issue of the US$ 1 billion sovereign bonds closed within 14 hours after opening at 9 a.m. Hong Kong time on Monday (27), attracting bids amounting to more than US$ 6.3 billion.

The 10 year bonds yielded 6.25 percent through competitive bidding in an issue managed by jointly HSBC, Royal Bank of Scotland, Bank of America Merrill Lynch and Bank of Ceylon. The three foreign banks have also been appointed as sovereign ratings advisors to the government for the next four years.

"There are two things that make this bond issue different from the previous sovereign bond issues. The first being the extension of the yield curve from five years to ten, while the second, the size, US$ 1 billion from the previous issues of US$ 500 million. Investor response was overwhelming," Siriwardena told The Island Financial Review.

"The fact that investors picked up the issue at 6.25 percent is also a reflection of their confidence in Sri Lanka’s economy.

Inflation is benign, the exchange rate is stable, reserves are strong and the economy has shown strong growth during the first and second quarters (7.1 percent and 8.5 percent), this is why they accepted the bonds at this rate for ten years," he said.

The proceeds from this sovereign bond issue would be utilized for infrastructure development activities carried out by the government and also to restructure the existing government debt portfolio by retiring high cost domestic debt and short term foreign currency denominated debt.

A sovereign bond issue for US$ 500 million, after the end of the conflict last year, was 13 times oversubscribed and was priced at 7.4 percent. This issue was the second since October 2007, which was also for US$ 500 million priced at a much higher rate of 8.25 percent.

"Orders were received from 362 investors globally. By geographic distribution, 52.5 percent of the bonds were allocated to investors in the United States, 25 percent to investors in Europe and 22.5 percent to investors in Asia. By investor type, 85 percent of the bonds were allocated to Fund and Asset Managers and the balance to Pension Funds, Insurance companies and banks," the Central Bank said in a statement last afternoon.

"The Offering is of 144A / Reg. S format and the bonds will mature in October 2020. The bonds are rated B+ by two international rating agencies, Standard & Poor’s and Fitch Ratings and will be listed on the Singapore Exchange.

"The current coupon rate of 6.25 percent for the 10 year sovereign bond is significantly lower than the cost of borrowings as compared to previous two international offerings in 2009 and 2007," the Central Bank said.

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

$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.

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

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

28th September 2010, www.dailynews.lk

Sri Lanka has received bids of more than $2.5 billion for its 10-year dollar bond, and the deal looks set to price tighter than the expected 6.5 percent, sources said on Monday.

Sri Lanka is the latest emerging sovereign to venture into bond markets as investors’ risk appetite has returned with a vengeance this month, and its offer has met with solid demand.

Fund managers reported that the book size was at $2.5 to $3 billion so far, compared with the expected $1 billion to be sold.

Books have closed in Europe and Asia.

Sources had earlier told Reuters the deal would price around 6.5 percent. Sri Lanka plans to use the bond’s proceeds to fund the budget and to pay short-term debt.

“Given the books are at these levels already and the U.S. is yet to put in (orders), 6.375 percent (yield) looks likely,” one fund manager in London said. Asian orders had been around $1 billion. The Sri Lankan central bank had said earlier it planned to issue $1 billion of sovereign bonds. A source with knowledge of the deal said Colombo would likely cap the issue at $1 billion.

This will be the island’s third global debt issue since 2007, when it issued a maiden $500 million, five-year bond.

The government sold another $500 million, five-year bond in 2009. Bank of America, Merrill Lynch , HSBC Holdings Plc and Royal Bank of Scotland Group Plc are managing the sale.

“We are seeing considerable interest for emerging market bonds, and Sri Lanka will play right into that,” said Scott Bennett, who manages $1.5 billion in Asian fixed income as head of Asian Investment at Aberdeen Asset Management in Singapore.

The sale comes a week after Standard & Poor’s raised the country’s sovereign credit rating by a notch to B-plus from B, citing growth prospects and government efforts to narrow the budget deficit.

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Sri Lanka's $ 1bn 10yr Sovereign Bond May Yield 6.5pct and Expected to be Comfortably Oversubscribedeld

Sri Lanka's $ 1bn 10yr Sovereign Bond May Yield 6.5pct and Expected to be Comfortably Oversubscribed

27th September 2010, www.lankabusinessonline.com

Sri Lanka has opened subscriptions for a billion US dollar 10-year sovereign bond which may sell for around 6.5 percent days after the International Monetary Fund gave 212 million US dollars to the Central Bank to beef up already high reserves.

A Bloomberg newswires report said the bond may yield around 6.5 percent.

A source familiar with the sale said there is strong interest for the bond, which is expected to be "comfortably oversubscribed", with bids collected as global markets open westwards.

Sri Lanka has been on a road show arranged by the Bank of America, HSBC Holdings and Royal Bank of Scotland group which is assisted by state-run Bank of Ceylon to sell the bond.

Fitch Ratings Monday gave a 'B+' rating with a 'positive' outlook for the bond. Fitch lifted the outlook on Sri Lanka's sovereign credit rating from 'stable' to 'positive' ahead of the bond sale and Standard & Poors' upgraded its rating to 'B+' from 'B'.

Moody's issued a 'B1' rating for the first time.

Agencies said the ratings could improve if the government improves is budgeting and the central bank keeps inflation low and the economy stable.

Sri Lanka's statistics office estimated economic growth at 8.5 percent for the second quarter and stocks are up over 100 percent so far this year.

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Sri Lanka Road Show to Sell $1bn Sovereign Bond Late September

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Sri Lanka Road Show to Sell $1bn Sovereign Bond Late September

14th September 2010, www.lankabusinessonline.com

Sri Lanka has kicked off a road show to sell a billion dollar sovereign bond later this month, a media report said.

Officials and investment banks promoting the issue will meet fund managers till September 24, a Bloomberg newswires report said.

Investor meetings will be held in Singapore, Hong Kong, London and the United States, the report said.

The government has hired Bank of America Corp., HSBC Holdings and Royal Bank of Scotland to help it arrange meetings with credit investors starting September 15, it quoted a person familiar with the matter as saying.

The road show comes just as Sri Lanka's long-term foreign currency sovereign credit rating was raised by Standard & Poor's to 'B+' from 'B' with a stable outlook.

The rating agency has said the upgrade takes into account the strengthening of Sri Lanka's balance-of-payments position and plans to cut the fiscal deficit.

However, the rating agency warned that there were ongoing risks posed by excessive public and external borrowings and the risk of a rebound in inflation.

Related Info:
S&P Raises Sri Lanka’s Ratings. B+ for Foreign Currency Debt Rating with a Stable Outlook

Sri Lanka Bonds Out Perform BRIC Bonds in International Capital Markets - Survey by JP Morgan Chase and Co

01st September 2010, www.island.lk

After the end of a thirty year old war last year, Sri Lanka’s sovereign bonds have out performed bonds from Brazil, Russia, India and China (BRIC) in international capital markets according to a survey carried out by JP Morgan Chase and Co, which augurs well for US$ 1 billion sovereign bond issue later this year, a report by Bloomberg newswire service said.

"Sri Lankan debt has returned 39 percent since May 18, 2009, when the government defeated Tamil Tiger rebels, according to JPMorgan Chase & Co.’s EMBI Global Index. That compares with 12 percent in China, 22 percent in Brazil and 26 percent in Russia. Company bonds of India, which doesn’t have a dollar-sovereign issue, delivered gains of 26 percent," Bloomberg newswire said in a report filed August 30.

Bloomberg said BRIC economies accounted for about 40 percent of the world’s foreign-exchange reserves and its population. "The Colombo All-Share Index of shares climbed 177 percent since the war ended, the world’s best performer, while the rupee strengthened 2.2 percent to 112.65 per dollar," it said.

The government is planning to issue a US$ 1 billion Eurobond issue later this year to retire short term domestic debts and meet short term foreign loan commitments.

State banking giant Bank of Ceylon was appointed to manage the sovereign bond issue along with HSBC, Bank of America Merrill Lynch and the Royal Bank of Scotland. These three banks were recently appointed by the government as advisors to Sri Lanka’s efforts to improving its sovereign rating to investment grade. Their term as advisors would last four years. Ten international investment banks had vied for this position.

According to Bloomberg investors were seen to be bullish on Sri Lanka’s next debt issue.

"Demand for bonds from countries like Sri Lanka is still high," said Milan-based Francesca Di Cesare, who helps oversee $10 billion of assets including 2015 Sri Lankan debt at Aletti Gestielle SGR SpA, as quoted by Bloomberg newswire, "Investors struggle to find this paper."

Bloomberg also quoted a portfolio manager Jetro Siekkinen, who oversees $7.8 billion of assets including Sri Lankan 2015 debt at Aktia Asset Management in Helsinki who said, "Demand will be strong and I will definitely be adding on to my holding. The sales should be successful in this kind of yield-hungry environment," he told Bloomberg.

The Central Bank is observing radio silence as per US Securities and Exchange Control laws and officials are not permitted to comment on the upcoming issue, let alone announce its issue date, until and after the offer is closed.

Sri Lanka's $1bn Bond to be Managed by HSBC, Bank of America & Royal Bank of Scotland

12th August 2010, www.bloomberg.com, By Anusha Ondaatjie

Sri Lanka hired HSBC Holdings Plc, Royal Bank of Scotland Group Plc and Bank of America Corp. to manage a proposed $1 billion overseas bond sale later this year, the South Asian island’s central bank said.

The selection was made from among seven foreign lenders and investment banks that expressed their interest to manage the sale, the Central Bank of Sri Lanka said on its Web site today.

The bond sale would be subject to market conditions, the central bank said. It appointed Bank of Ceylon as co-manager to work with the lead arrangers for the issue.

Sri Lanka in July announced plans to sell the bonds, with maturities of as much as 10 years, by the end of 2010 to help refinance expensive loans. The end of the island’s three decades of civil war in May has restored investor confidence and attracted foreign flows.

HSBC, JPMorgan Chase & Co., and Royal Bank of Scotland helped arrange Sri Lanka’s last global bond sale in October that attracted bids for more than 13 times the $500 million offered.

This year’s overseas debt sale will be the third by the nation since its debut offering in October 2007.

Standard & Poor’s and Fitch Ratings raised their outlook on Sri Lanka’s debt in October last year. S&P revised it to positive from stable, and assigned the nation’s long-term foreign-currency debt rating at B, five levels below investment grade. Fitch changed the outlook to stable from negative. It affirmed Sri Lanka’s rating at B+, four levels below investment grade.

To contact the reporter on this story: Anusha Ondaatjie in Colombo, Sri Lanka at anushao@bloomberg.net

Sri Lanka to Seek Ratings from Moody's, Standard & Poor’s & Fitch Before $1bn Sovereign Bond Issue

10th August 2010, www.bloomberg.com

Sri Lanka is seeking a rating of its sovereign debt from Moody’s Investors Service ahead of a planned $1 billion overseas bond sale, central bank Assistant Governor C.J.P. Siriwardena said.

The South Asian nation last month announced plans to sell the bonds, with maturities of as much as 10 years, by the end of 2010 to help refinance expensive loans. Moody’s doesn’t have a credit rating for Sri Lanka, while Standard & Poor’s and Fitch Ratings place the country’s long-term foreign-currency debt at non-investment grade.

“This is the ideal time to get a rating from all the three agencies,” Siriwardena said in a telephone interview today from Colombo. He said the economy is poised to grow more than 7 percent this year after the end of the country’s civil war.

Sri Lankan troops defeated the separatist Liberation Tigers of Tamil Eelam in May 2009 and ended their 26-year struggle for a separate homeland, boosting growth prospects.

S&P and Fitch raised their outlook on Sri Lanka’s debt in October last year. S&P revised it to positive from stable, and assigned the nation’s long-term foreign-currency debt rating at B, five levels below investment grade. Fitch changed the outlook to stable from negative. It affirmed Sri Lanka’s rating at B+, four levels below investment grade.

Moody’s Visit

Representatives from Moody’s are in the island nation this week to meet with senior government and central bank officials, Siriwardena said. He said Fitch and S&P officials will also visit Sri Lanka this month to assess the economy.

“Sri Lanka should get a rating upgrade of at least one notch since the economy is now very robust,” said Sarath Rajapakse, director of research at Capital Trust Securities Ltd. in Colombo. “The bond offering will attract strong demand.”

The benchmark Colombo All-Share Index rose 4.1 percent to 5063.98 at 1:53 p.m. local time. The yield on the benchmark four-year bond was little changed at 9.3 percent, according to Standard Chartered Plc.

This year’s overseas debt sale will be the third by the nation since its debut offering in October 2007.

The nation’s last global bond sale in October attracted bids for more than 13 times the $500 million offered.

President Mahinda Rajapaksa’s government is aiming to accelerate growth to at least 7 percent in 2010, the fastest pace in four years.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net.

Sri Lanka Invited Top 10 Banks to Raise $1bn Sovereign Bond

29th July 2010, www.news360.lk, By Prasanna C Rodrigo

Sri Lanka has invited top 10 banks in the Bloomberg League table to submit proposals to raise US$ 1 billion by a planned sovereign bond issue , which is due after august this year.

C.J.P. Siriwardena, Assistant Governor of the Central Bank told www.news360.lk the invitations were sent during last week.

Among the Banks invited ranks Barclays Capital, Deutsche Bank, JP Morgan, UBS, Credit Suisse, CITI, Merrill Lynch, BNP Paribas, HSBC and RBS.

Siriwardena said “The banks will have to submit proposals by Monday”

The Central Bank is hoping to select at least 3 banks to be the lead managers for the issue.

The Bank plans to go in for a 7 to 10 year tenor bond.

Siriwardena earlier said “This time we want to increase the yield curve” and added that at present market conditions, the interest rates would be around 6%, even for a 10 year bond.

Sri Lanka on 2 previous occasions successfully raised funds via sovereign dollar bond issues, each amounting to US$ 500 million.

One was in 2007 and the next was in 2009.

The public Debt department says the confidence on the Sri Lankan economy among international investors at present ranks high which makes it ideal to raise dollar bonds.

The debt office says the 2007 bond which was sold at a yield rate of 8% is now trading at 4.03%.

While the 2009 bond is trading at a rate of 5.18% and it was also sold at a higher rate of 7.40% in 2009.

When the yield goes down the price of the bond goes up, which makes it attractive for buyers.

Sri Lanka to Issue $1bn International Sovereign Bonds

23rd July 2010, www.news.lk

Sri Lanka government Thursday approved the issue of international sovereign bonds in the international capital market under the supervision of the Central Bank upto USD 1000 million.

Government spokesman Mass Media and Information minister Keheliya Rambukwella told media that the government under the supervision of Sri Lanka Central Bank will issue International Sovereign Bonds in the international Capital Market at appropriate, longer term maturity during the year 2010.

He said that the Monetary Board having assessed the borrowing needs, resource availability and implication of the borrowing programme on the domestic interest rate structure, was agreeable to the issuance of international sovereign bonds upto the value of US$ 1000 million.

“The Appropriation Act No 7 of 2010,has authorized a gross domestic and foreign borrowings limit of Rs. 980 billion for 2010.It consists of Rs. 456 billion provided for repayment of loans and the balance Rs. 524 billion as new borrowings to meet other financing needs including domestically financed capital projects." The minister said So far in the year the government has borrowed Rs 389 billion and the borrowings for the rest of the year could go upto Rs 591 billion without exceeding statutory limits.