The Central Bank yesterday said it has successfully raised $ 2.5 billion after launching its first International Sovereign Bond (ISB) on Thursday, which will be largely used for debt repayments and bolstering reserves.
On Thursday, the Central Bank, on behalf of the Democratic Socialist Republic of Sri Lanka, returned to the US dollar bond markets, successfully pricing a new issuance of $ 1 billion five-year and $ 1.4 billion 10-year Senior Unsecured Fixed Rate Bonds (the Bonds) with maturity dates of 14 March 2024 and 14 March 2029, respectively.
The Bonds have been rated ‘B2’, ‘B’ and ‘B’ by Moody’s Investors Service, Standard and Poor’s, and Fitch Ratings, respectively. The Bond was issued just days after the International Monetary Fund (IMF) extended its $ 1.5 billion Extended Fund Facility (EFF) with Sri Lanka and the Government presented its Budget for 2019.
This marks Sri Lanka’s 13th US dollar benchmark offering in the international bond markets since 2007, reflecting the international investor community’s continued support for Sri Lanka through the years. BOC International, Citigroup, Deutsche Bank, HSBC, J.P. Morgan, SMBC Nikko, and Standard Chartered Bank acted as the Joint Lead Managers and Book runners on the successful transaction.
Capitalizing on the strong market backdrop, and leveraging on the positive momentum generated by the recent IMF staff-level agreement on the fifth review of Sri Lanka’s Extended Fund Facility, Sri Lanka announced the transaction during the Asia morning of 7 March.
The joint syndicates released terms and initial price guidance for new five-year and 10-year tranches at 7.20% area and 8.20% area, respectively. The transaction saw strong interest from a wide range of high quality investors, which allowed Sri Lanka to tighten final price guidance to 6.90% (+/- 5bps) on the five-year tranche, and 7.90% (+/- 5 bps) on the 10-year tranche. The Bonds eventually priced at the tighter end of the range during
New York hours, with a yield of 6.85% and 7.85% for the new five-year and 10-year tranches, respectively, representing price tightening of 35 bps from initial guidance, for both tranches.
The final order book stood at over $ 2.7 billion across 190 accounts for the five-year tranche and over $ 4.8 billion across 252 accounts for the 10-year tranche – clearly reflecting global investors’ continued confidence and positive outlook on Sri Lanka’s economic growth story.
The order book was well diversified across both tranches. The five-year tranche saw allocations of 39% to the US, 38% to Europe, and the remaining 23% to Asia. By investor type, the split was 91% to fund managers, 5% to insurance and pension funds, 3% to banks, and 1% to other investors.
The 10-year tranche saw allocations of 44% to the US, 39% to Europe, and the remaining 17% to Asia. By investor type, the split was 90% to fund managers, 5% to insurance and pension funds, 4% to banks, and 1% to other investors.
In a first for Sri Lanka, the Bonds are also expected to be listed on the London Stock Exchange (LSE) to be admitted to the LSE’s International Securities Market (ISM) in addition to the listing on the Singapore Exchange Securities Trading Ltd. (the SGXST) for the listing and quotation of the Bonds on the SGXST.