Bond 002

After a two-year hiatus, the government is tapping the international debt market to raise US$ 250 mn, to bridge the budget deficit.
The Sri Lanka Development Bond issue will once again hit the limelight in July when the Central Bank re-issues US$ 91.5 mn worth of paper and US$ 158.5 mn in new issues.rn

rnldblquote The issue will carry a minimum two-year tenure, but with no put option,
dblquote Central Banks Superintendent Public Debt Dept., Dharma Dheerasinghe told Lanka Business Online on Wednesday.rn

rnThe proceeds will help ease the countrys rupee debt stock and prop up gross official reserves, which currently stands at US$ 2,277.5 mn as at end Feb. rn

rnLike previous issues, the dollar denominated debt paper will not carry a rating. Sri Lanka has yet to seek a sovereign rating despite successfully raising smaller dollar denominated issues in the international market.rn

rnDevelopment bonds, worth US$ 250 mn were issued previously in June 2002, of which around US$ 158 mn worth of paper has already been settled. The balance is due to mature in June.rn

rnThe inaugural issue carried a variable rate of around 200 basis points above the six-months London interbank offered rate. The entire issue was sold through banks and primary dealers.rn

rnWith four-year bonds going at around 9.00 percent in the secondary market, dealers are cautiously watching to see how the bank intends to price the issue.rn

rnDealers say the bank may have to come up with a high return, and break it into tranches less than US$ 50 mn.rn

rnAlternatively the bank could also open the issue up to resident Sri Lankans to participate in the issue by utilizing their dollar deposits. The earlier issue was limited to non-resident Sri Lankans.rn

rnSri Lanka is keen to tap international capital markets in the face of dwindling concessionary funds and mounting domestic debt. rn

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-LBO Newsdesk: LBOEmail@vanguardlanka.comrn