Sri Lanka raises USD1.5bn in Sovereign Bond issue: report

Oct 28, 2015 (LBO) – Sri Lanka has raised 1.5 billion dollars from  a 10-year sovereign bond issued to international investors at 6.85 percent, a report said.

The initial price guidance of 7 percent was lowered with order books exceeding 3.3 billion dollars.

In May, Sri Lanka raised 650 million dollars via a 10-year sovereign bond at 6.125 percent per annum yield.

Bankers estimate there is a 25bp to 30bp premium relative to the 650 million dollar bond which is currently yielding 6.46 percent.  US 10-year treasuries are also down to 2.03 percent from 2.28 percent in May.

Orders came in from 290 accounts, with 55 percent from the United States, 29 percent from Europe and the rest from Asia, Reuters reported.

Of the accounts, 88 percent represented fund managers, 9 percent represented banks and 3 percent bid on behalf of pensions and insurance funds.

Sri Lanka Central Bank officials were not available for comment.

Sri Lanka’s budget deficit is expected to increase to 6.8 percent of GDP this year with foreign reserves dropping to 6.8 billion dollars in September, a shortfall this bond issue is expected to fill.

Rated B1/B+/BB- by Moody’s, S&P and Fitch respectively, Sri Lanka mandated Citigroup, Deutsche Bank, HSBC and Standard Chartered for the offering of bonds.

According to reports, the bond issue was a Reg S/ 144a issue. 144A is a private placement in the US for US investors and Reg S is a bond issued in the Eurobond market for international investors.

Rule 144A is an SEC rule issued in 1990 that modified a two-year holding period requirement on privately placed securities by permitting qualified institutional buyers (QIBs) to trade these positions among themselves.

RegS and 144A Bonds are generally assigned two separate sets of securities identification codes.

Reg S bonds get a common code and an International Securities Identification Number (“ISIN”) and are generally accepted for clearance through the Clearstream, Luxembourg and Euroclear systems.

144-A bonds get a CUSIP number and an “ISIN” and are generally accepted for clearance through the DTC system.