Citibank tipped to lead manage billion dollar sovereign bond issue

Ishara S. Kodikara | AFP | Getty Images Sri Lanka Prime Minister Ranil Wickremesinghe, center, speaks to supporters at the prime minister's official residence in Colombo on December 16, 2018, after he was reappointed as prime minister by Sri Lanka's president, the same man who fired him from the job nearly two months ago.

Feb. 02 (LBO) – Citibank is likely to get the mandate to raise a billion dollars for the Sri Lanka government through sovereign bonds this year, Lanka Business Online learns. The seven year bonds, would carry a six-month floating rate, based on the London Inter Bank Offered Rate (LIBOR).

Last December, Citibank raised US$ 100 million for the government through a three year syndicated loan, at 95 basis points above LIBOR, but analysts believe total issue costs may have touched 125 basis points above LIBOR.

But analyst say the billion-dollar issue (SLRs 100 billion), which has a longer tenure of seven years, as well as its size, is likely push costs up to 150 basis points above LIBOR or more.

Six-months US dollar LIBOR is now around 4.7 percent.

But analysts say total issue costs may rise if it is broken up into tranches.

Sri Lanka government faces a 9.1 percent overall budget deficit this year, but a roll back of reforms has made it difficult to earn concessionary donor program loans.

The government has traditionally relied on donors to bridge the external resource gap and plug a part of the revenue deficit.

The government is now turning to international capital markets to avoid further rises in domestic interest rates.

Sri Lanka has a BB- rating from Fitch and a B+ rating from Standard & Poor’s.