State-run Bank of Ceylon signed up for US$ 130 million two-year syndicated loan last Friday, to finance its ongoing trading facilities including oil imports to Ceylon Petroleum Corp., officials said Monday. State-run Bank of Ceylon signed up for US$ 130 million two-year syndicated loan last Friday, to finance its ongoing trading facilities including oil imports to Ceylon Petroleum Corp., officials said Monday. The syndication, the largest so far for any Sri Lankan bank, was priced at 0.75 percent over the three-months London Interbank offered rate or LIBOR.
The dollar bond comes with a one-year put option and the final tally was over and above Bank of Ceylon’s initial mandate to raise US$ 75 million.
Fourteen banks from Europe, Middle East, India and Asia chipped into the deal, which was arranged by Citibank N.A.
“The response was pretty good, because we raised the money purely based on our financial strength, though Sri Lanka is yet to get a sovereign rating,” Bank of Ceylon’s General Manager, S N P Palihena told reporters.
Palihena declined to reveal the bank’s exposure to Ceypetco, citing customer confidentiality. But CPC Chairman Jaliya Medagama said Sri Lanka’s oil bill will exceed US$ 1.4 million this year on account of soaring crude prices.
The international roadshow in Singapore and Hong Kong was carried out during the period Sri Lanka went through some internal shocks, including the assassination of Foreign Minister Lakshman Kadirgarmar.
“We told investors that these were unfortunate events. Some of the participating banks told us that they would like to see more such issues coming out of Sri Lanka, that shows the confidence investors still have in our country,” says Kapila Jayawardena, Citibank Sri Lanka’s Country Head.
Bank of Ceylon does not have an international rating though its senior rupee debt carries a local rating of AA (sri) from Fitch Ratings Lanka.
Palihena says an international rating is possible for future bond issues, once Sri Lanka’s sovereign rating comes through this year.
The Sri Lankan government has sought the services of Fitch Inc., Moody’s and Standard & Poor’s for a country rating, which is due in November. The island nation which has hired Citigroup N.A. to advise in the sovereign rating process, hopes to tap foreign debt markets to raise cash, as traditional donor driven finance packages dry up.
Sri Lanka’s largest commercial bank is also looking at raising around Rs. 5 billion in debentures to meet its capital requirements.
Palihena says the rupee issue is still not finalised, but will be raised through a private placement. “We are not in a hurry, but we have sent feelers out.”
Bank of Ceylon and People’s Bank currently control 55 percent of Sri Lanka’s banking assets, followed by Commercial Bank of Ceylon, Hatton National Bank and NDB Bank.
Set up in 1939, BOC is the largest local bank in terms of assets (Rs. 280 billion) and commands about a 17.3 percent market share. With some 5.4 million customer accounts, the bank’s deposit base exceeds Rs. 200 billion.
For the six months ended June 30, 2005, Bank of Ceylon made a pre-tax profit of Rs. 1.3 billion.
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