Sri Lanka DFCC says 9.6-pct dollar bond profitable

Oct 25, 2013 (LBO) – Sri Lanka’s DFCC Bank said 100 million US dollars from a 5-year bond sale at 9.6 percent was still profitable, and compared ‘very favourably’ with the cost of raising rupee funds. DFCC said it will use the 100 million US dollars to retire existing borrowings, on-lend to infrastructure development and key industry sectors including those identified by the government, and to grow the bank’s own portfolio.

DFCC faced tough conditions in international markets where risk aversion is now higher for speculative frontier economy debt.

The bond went to market at a price guidance of 9.6 percent but there was no tightening of the final coupon unlike in earlier sovereign issues and bond sales by state banks.

Substantial oversubscriptions are required to tighten the final yield of a bond.

Sri Lankan state banks have already raised 1.2 billion US dollars from bond markets for state spending, though the sovereign itself stayed away this year.

Sri Lanka’s interest rates are among the highest in Asia due to a high spending state which borrows heavily to finance a chronic budget deficit.

“Although off-shore funding options at lower interest rates for shorter tenors ar