Sri Lanka torn between syndicated loan and sovereign bond: official

Jan 09, 2008 (LBO) – Sri Lanka may float a medium to long term syndicated loan or a bond to raise funds from foreign markets if conditions are right in 2008, a top government official said Wednesday. Last year the Sri Lanka rupee only depreciated by about one percent. “Depending on our needs and depending on market conditions only we will go for the bond issue,” Treasury secretary P B Jayasundera said.

“Whether it will be a bond issue or whether it is a medium to long term loan will all depend on the terms and the market conditions.”

A 2-year floating rate 250 million dollar Sri Lanka Development Bond (SLDB) issued to domestic investors and banks is maturing on June 28. In September, a further 70 million dollars falls due.

The government has indicated earlier that it was keen on extending the tenures of its short term commercial borrowings.

Jayasundera said the Central Bank, which runs the government’s debt office, will renew or retire the maturing SLDBs “depending on the options available.”

In the past Sri Lanka has expanded the volume of the outstanding issue when rolling over SLDBs.

Last year Sri Lanka raised 500 million dollars from a sovereign bond at 8.25 percent. Sri Lanka has also allowed foreign investors to buy into rupee denominated bonds.

About 460 million dollars was raised through rupee bonds in the first half of 2007 at rates of between 14 to 15 percent.

After more volumes were made available in late November foreign bond buyers have been snapping up the rupee bonds which now yield between 19 to 20 percent.