Sri Lanka rakes in US $ 215 mn from dollar bonds while risk premium edges up

March 09 (LBO) – The risk premium demanded by buyers of Sri Lanka dollar bonds edged up Friday, but the government raked in all offers raising four times the money it originally sought. Raising dollar debt has become an important part of bridging Sri Lanka’s fiscal deficit over the past four years, but relatively short tenure (2-3 years) is ratcheting up the commercial loans volumes that have to be rolled over or repaid each year.

Sri Lanka has a B + rating from Standard and Poors and a BB – rating from Fitch with negative outlooks.

Fitch sovereign rating specialists have called for better fiscal management and an end to the conflict if the country wanted to improve its rating. The government’s public debt office said the weighted average yield on the 2-year bond issue Friday was 155.24 basis points above the London Inter Bank Offered Rate (LIBOR).

In September Sri Lanka raised 2-year bonds at a premium of 144.06 basis points above LIBOR.

The government originally called offers to sell 50 million dollars worth development bonds, but was oversubscribed by four times.

“As the offer was heavily oversubscribed at reasonably lower margins, the Government has decided to accept all bids received, US Dollars 215.25 million of 2 year SLDBs, at a rate of 6 month LIBOR + 155.2407 basis points (weighted average),” the public debt office said in a statement.

“The offer was overwhelmingly subscribed by both reputed foreign and local commercial banks.”

The bond issue which the government calls Sri Lanka Development Bonds was the first in 2007, and was within the limits approved borrowing limit of parliament for 2007, the statement

Foreign citizens, non resident Sri Lankans, Sri Lankan dual citizens, specified companies which have entered into agreements with the Board of Investment of Sri Lanka and specified insurance companies could buy the bonds.

The eligible investors’ response to the issue is very encouraging and clearly reflects the investors’ confidence and their preference to lock their funds in guilt edged Dollar Bonds issued by the Government of Sri Lanka,” the statement said.