The Bank of Ceylon (BoC) has seen huge success with its US$500 million, 5-year tenure bond issue, drawing subscriptions totalling $3.86 billion, more than seven times the amount sought, official sources said on Friday.
The issue, for which subscriptions closed on Thursday, was priced at a yield of 6.875% with the money to be used for 'general corporate purposes'. Bank of America Merrill Lynch, Citi and HSBC were the Joint Lead Managers and 'book runners' for the issue. BoC's top management has been on a roadshow in the past two weeks to promote the issue.
They include BoC Chairman Gamini Wickremasinghe, General Manager Ms. W.A. Nalini, Chief Financial Officer Asoka Rupasinghe and two Assistant General Managers, attending investor meetings in Singapore, the Middle East, UK, Hong Kong and the US. However Mr. Wickremasinghe had only attended the final promotion meeting in the US, the sources said.
Bank trade union officials are accusing the management of raising the money to fund the cash-strapped government and institutions like the Ceylon Petroleum Corporation, converting the US dollars to Sri Lankan rupees. However the BoC sources said the bank would lend this new resource in dollar terms. "If we lend it in rupee terms, we are subject to a huge foreign exchange risk. By lending in dollars, the risk is borne by the borrower," one source said.
The Central Bank recently issued guidelines enabling commercial banks to independently seek foreign funds from outside sources, particularly for two-tier capital. In recent months many banks including Sampath and HNB have raised funds in the international markets. The BoC bond issue is the biggest by any Sri Lankan commercial bank.