Sri Lanka Bank of Ceylon selling US$30mn 5-year bond

Standing left to right – Mr. Dinesh Jebamani (Chief Manager Liability Product Management and New Age Media – Seylan Bank), Mr.Sudesh Peiris (Senior Manager – Digital Banking Channels – Seylan Bank), Ms. S.Senevirathne (Representative of the Revenue Department – Western Province), Mr. Tilan Wijeyesekera (Deputy General Manager – Retail Banking – Seylan Bank) and Mr. Malik Wickremanayaka (Deputy General Manager – Operations – Seylan Bank)

Sept 19, 2008 (LBO) – Sri Lanka’s state-run Bank of Ceylon is selling a 30 million US dollar 5-year bond which will pay a floating interest rate every six months, dealers and officials said. This week top central banks have been printing billions of dollars, Euro and Yen to fill disappearing liquidity with AIG Insurance and Lehman already buckling under losses and funding shortfalls.

Interest rates in rupee bond markets have also been edging up.

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The bond will pay a rate of 300 basis points above the 6-month London Interbank offered rate.

Corporates, such as exporters who usually deposit in non-resident foreign currency accounts (NRFC) accounts, and other dollar savers are buying into the bond, dealers said.

The minimum subscription is 100,000 US dollars.

Last week the government sold 60 million dollars of 2-year bonds at 289 basis points above LIBOR, with a 70 million dollar bond also maturing around the same time.

The Bank of Ceylon is a major financier of the government.

A state savings bank has also been putting feelers in the market to raise dollars in tranches of around five million dollars, dealers said.

Credit spreads have widened around the world after the August 2007 collapse of the sub-prime credit bubble, while Sri Lanka’s credit rating has also been cut by rating agencies.