Six Calls

Six investment banks are vying to take up the post of international ratings advisor to the government, as it embarks on the process of seeking a sovereign rating.
Central Banks Superintendent Public Debt, Dharma Dheerasinghe says HSBC, Standard Chartered Bank, Citibank, Deutsche Bank, UBS Warburg and JP Morgan have sent in their proposals.rn

rnldblquote We will evaluate them and select an advisor in about three weeks time,
dblquote Dheerasinghe told Lanka Business Online.rn

rnThe bank last month wrote to international ratings agents, who currently have a local presence, about playing an advisory role in the rating process.rn

rnAfter toying with the idea for years, the government gave the greenlight recently, to seek a country rating from at least two international rating agencies.rn

rnThe bank says that the government had no immediate plans to raise funds by issuing bonds in international capital markets. rn

rnThe rating process will be done in two stages.rn

rnFitch Ratings International, which has a local office through Fitch Ratings Lanka, will get the job to do the initial rating. rn

rnCentral Banks Deputy Governor, W A Wijewardene told reporters in Sept., that a rating from Fitch was expected by end January next year.rn

rnThe government also wants a rating from one of the two internationally reputed rating agencies, namely, Standard & Poors and Moodys Investor Services, Dheerasinghe said. rn

rn”An international sovereign rating will improve the awareness and profile of Sri Lanka among international investors,” says Dheerasinghe.rn

rnThe sovereign rating would also “facilitate the private sector in their dealings with the international community”. rn

rnSri Lankas total debt as at end-Aug. was Rs. 1.76 trillion up from Rs. 1.66 trillion in 2002. Total debt to GDP ratio stands at about 110 percent at present. rn

rnAbout 40 percent of loans are secured at concessionary rates from foreign donors. rn

rnIn Sept., the government borrowed US$ 100 mn through a five-year floating rate note from Citibank. The issue was its largest-ever foreign commercial borrowing. rn

rnIn June, the government signed up for a US$ 33 mn loan from HSBC, to be paid over a 13 ‘bd year period. The HSBC issue is the countrys longest ever foreign commercial borrowing. rn

rnFitch Ratings Lanka said last year that Sri Lankas sovereign rating is on par with its neighbour India, because of its record of fiscal discipline and never having defaulted on a payment. rn

rnFitch put Sri Lankas rating at between B-plus and BB-plus, in the same range as India, but below investment grade of BBB. rn

rnBut a rating now may be higher, with the economy forecast to grow nearly six percent this year and a steady inflow of foreign funds. rn

rnIndias local-currency debt is rated BB plus by Fitch, Ba2 by Moodys Investors Services and BB+ at Standard & Poors, all of which are junk ratings. Its foreign-currency debt is rated BB by Fitch, Ba1 at Moodys, and BB by S&P.rn


-Mel Gunasekera: melg@vanguardlanka.comrn