Govt achieves success with HSBC deal:

US$ 500 m sovereign bond issue oversubscribed

The five-year US Dollar sovereign bond issue offered by the Government has received more than US$ 1.25 billion orders overshooting the target by more than 200 per cent, reflecting investor confidence in the island’s US$ 26 billion economy.

While the bond issue was for US$500 million, the orders received so far have crossed US$ 1.25 billion, news agencies reported.

The issue is rated B-plus by Standard & Poor’s and managed by leading international banks HSBC, Barclays Capital and J P Morgan.

The Government has offered to pay a yield of 8.25 per cent for the five-year bonds.

The pricing and size were in line with initial guidance.

When the Government announced the sale of bonds to raise funds for infrastructure development projects, it came under heavy criticism from the Opposition.

After issuing a statement in Parliament against the bond issue, the UNP organised a protest rally in front of the HSBC Bank urging the Bank not to grant loans to the Government. UNP leader Ranil Wickremesinghe wrote to the HSBC threatening that any future UNP Government would not only refuse to repay the loan but also cancel the Bank’s license.

“In spite this threat and other pressure tactics, investors have expressed total confidence in the economy,” analysts said. “This is an endorsement of the sound economic and financial policies of the Government and a boost for investments because this will be considered a clear indication of international confidence,” they said.

The Central Bank of Sri Lanka said it has selected J.P. Morgan, Barclays Capital and HSBC as Joint Lead Managers/ Bookrunners/ Underwriters to the US$500 million international sovereign bond issue.

The bond issue will be carried out by the Central Bank on behalf of the Government. This debut sovereign bond issue is also expected to serve as a benchmark for other corporate borrowers which have the capability of raising money in international capital markets.

This US $ 500 million would also stabilise the current rupee fluctuation, Central Bank sources said.

The funds that will be mobilised through the bond issue are to be used for financing the infrastructure development programmes of the Government.

The three lead managers were selected after the Central Bank invited proposals from selected banks/investment houses on July 2. In response, 12 international banks and investment houses submitted their proposals and made presentations out of which three were selected.