SLDB over subscribed

The Central Bank of Sri Lanka, on behalf of the Government, offered to issue Sri Lanka Development Bonds (SLDBs) to investor categories for subscription at a rate of US $ six month LIBOR plus a margin to be determined through competitive bidding.

The offer was opened on June 15, 2009 with the settlement on June 29, 2009. The Bonds on offer amounted to US $ 50 million for a two year maturity period. The offer was substantially oversubscribed by both foreign and local commercial banks, with the total bids received amounting to US $ 118 million (236 per cent of the sum offered).

Of such bids, the Government has decided to accept US $ 115.8 million of two year SLDBs at the market determined rate of US $ six month LIBOR + 4.97 percent (weighted average margin).

The US $ six month LIBOR rate was 1.16 percent yesterday.

This SLDB issue is within the annual borrowing limit approved by Parliament for 2009 and US$ 50 million mobilized through this bond issuance is to be used to settle the SLDBs that are maturing on that date. The excess fund mobilization of about US$ 66 million through this SLDB issue would limit Government requirement of new external foreign currency commercial borrowings during 2009.

Further, it would replenish the foreign currency reserves of the Central Bank, part of which was used to settle foreign currency commercial loan obligation of US $ 125 million on June 15, 2009.

The oversubscription and decline of the margin of this SLDB issue, compared to the last SLDB issuance in March this year and the increase in foreign investments in rupee denominated Treasury bonds and Treasury bills by Rs 22 billion (US$ 190 million) during the past 10 weeks clearly reflects the growing investor confidence in the Government.