Sri Lanka plans to issue a US$ 25 mn sovereign bond

Feb. 01 (LBO) – Sri Lanka plans to issue a US$ 25 million sovereign bond to expatriate countrymen this week, to fund the island’s rebuilding efforts, officials said Wednesday. The small issue will not use the country’s credit rating as a marketing tool, but the government is keen to accept any extra bids over an above the initial offer amount.

State-run Bank of Ceylon will lead manage the issue, with the Central Bank and the Treasury chipping in to market the paper.

“The Treasury and the Central Bank will tap our diplomatic missions abroad to reach out to Sri Lankans living and working overseas,” Bank of Ceylon’s Chief Dealer N K Dahanayake told LBO.

Pricing of the five-year issue has not been fixed yet, but the minimum subscription will start from US$ 500, or equivalent in sterling or euros, LBO learns.

Dubbed ‘Sri Lanka Nation Building Bonds’, the issue is tipped to be launched later this week and will be open for 180 days.

The bond will not go on sale in the US and Hong Kong due to regulatory barriers, but would be on offer in other countries.

Treasury Secretary P B Jayasundara said last month that the island planned to use its sovereign rating and issue up to a billion dollars in overseas bonds this year to pay for key infrastructure projects.

“We have large scale infrastructure projects like roads, power lined up in the pipeline worth over US$ 1.5 billion…so we will issue between US$ 500 million to US$ 1 billion worth of bonds in the international market this year,” he told businessmen.

Last December, Fitch Ratings assigned a speculative BB- sovereign rating to the country while Fitch gave a lower B+ rating.

In December, Citibank N.A. helped Sri Lanka raise US$ 100 million through a syndicated loan, which was priced at 95 basis points above the London Inter Bank Offered Rate or LIBOR.

Nearly a million Sri Lankans who live and work overseas, remitted around US$ 1.7 billion to the island last year, according to Central Bank data.