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Top international credit rating agencies fly in to rate Sri Lanka

Top international credit rating agencies fly into Sri Lanka, as the country pushes ahead to secure a sovereign rating before end November, officials said Friday. Top international credit rating agencies fly into Sri Lanka, as the country pushes ahead to secure a sovereign rating before end November, officials said Friday. Officials from Fitch Inc of USA are currently in the country talking to government representatives including the Central Bank.

Moody's Investor Service and Standard & Poor's are also expected to send in a team in October, sources close to the rating committee said.

"Our target is to get the rating out before the budget," the official said referring to the upcoming November 10 budget.

However, with a presidential poll due between October 22 and November 21, there is some uncertainty if the budget will take place on the due date.

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.

The government is keen to raise dollar denominated debt but not come out and said if it will be in the form of bonds or loans.

Sri Lanka has in the past raised dollar funds through unrated bonds and short-term loans from onshore banks.

"We don't plan to use it (sovereign rating) to finance the budget deficit, but to reconstitute some our public debt portfolio and see whether any debt can be refinanced by relatively cheaper debt," Treasury Secretary P B Jayasundera told reporters in August.

Raising dollar funds also takes the heat off the domestic debt market, which has seen interest rates creep up. Three-year treasury bonds currently yield between 10.50-60 percent.

"If the markets are good we will use the ratings opportunity to mobilise capital. A sovereign rating will also be a useful benchmark for Sri Lankan companies wanting to raise money in the global debt markets," Jayasundara said.

So far, Sri Lanka Telecom is the only local company to raise funds using an international rating.

Last year, the telecom giant issued a five-year US$ 100 million bond priced at 300 basis points above the London interbank offered rate or LIBOR.

Fitch and Standard & Poor's rates SLT's foreign currency debt B+ and its local currency debt BB-, both junk ratings reflecting the high-yield, high-risk nature of the company's debt

A sovereign issue could be a notch higher or similar to that of SLT.

Sri Lanka's total debt as at end June 2005 was Rs. 2.1 trillion or US$ 21.2 billion. Total domestic debt during the same period stood at Rs. 1.2 trillion or about US$ 12 billion, which works out to about 60 percent of the island's gross domestic product.

-LBO Newsdesk: LBOEmail@vanguardlk.com

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