Sri Lanka to re-issue forex bonds in US dollars and euros

May 15, 2008 (LBO) – Sri Lanka has started the process of re-selling a maturing 250 million dollar bond issue targeted at resident investors by calling for agents to market and sell the bond. Sri Lanka is expected to wrap up a 150 million dollar 3-year loan arranged by Standard Chartered Bank this month, with a one-year put option. A 50 million US dollar loan for 5 years arranged by Deutsche is also pending.

The government’s debt office, which is a unit of the central bank, said in a circular to market participants that the securities would be denominated in US dollars and Euros.

Known as Sri Lanka Development Bonds (SLDBs), the bonds were originally issued for two years and mature on June 28. In September, a further 70 million dollar tranche of SLDBs is maturing.

The bonds have been popular among qualified local investors who hold dollar assets and the rates have been attractive for the government in the past.

But an international credit crunch has pushed up risk premiums and dollar lending rates have also moved up in the domestic market making dollar assets dearer, while tenures have also been narrowing.