Government completes the raising of entire $1.5 bln bond budgeted for 2014
Sri Lanka this week raised another US$500 million long term international sovereign bond to finance counterpart funds required for various development projects and to maintain cash flows as the (earlier) $1 billion bond raised by the Central Bank four months ago is fully exhausted on ongoing projects, informed sources said
The Business Times exclusively quoting official sources as saying in a January 19th story that the Central Bank on behalf of the government will float this long term international sovereign bond in addition to US $1 billion bond raised in January this year following a directive of the Finance Ministry to issue such a bond when the need for such financing is arisen. The Government was compelled to raise US$ 500 million bond within three months from the US $1 billion bond issue as it needs more funds for various development projects and to maintain cash flows as well as to bring down machinery and equipment , official sources said.
A senior Central Bank official told the Business Times that the US$1 billion bond and the US$ 500 billion bond was raised in January and April this year in line with the budget considering the favourable international bond market but it will not be used to service foreign debt.
He said that the sum of US$1.5 billion raised through international sovereign bonds would be adequate to meet the country’s requirements and the government will have to work within the budgetary provisions. The money will be credited to the consolidated fund of the Treasury. The next servicing of a bond will be in 2015 when the $500 million bond raised in October 2009 matures, he said adding that this year there is no bond payment needed. Bond issues were suspended last year as foreign borrowings with restrictions in the 2013 budget have now been lifted.
The 2014 budget proposed to float a US$750 million long term international bond for government, urban and estate housing schemes and a further US$750 million to finance the counterpart funds required for various development projects.
The US$ 500 million 5-year International Sovereign Bond (Issue) on 07.04.2014 at a yield of 5.125 per cent per annum was the lowest among all the US Dollar benchmark offering by Sri Lanka in the international bond markets. Central Bank said that the issue represents the balance of the US$ 1,500 million approved International Sovereign Bond programme for 2014.
In a media release the Central bank said that with the post announcement interest from investors across Asia , Middle-East, Europe and the USA , Sri Lanka priced the issue at a yield of 5.125 per cent.
This tighter yield reflects the continued confidence that the international investors have placed in the sovereign bond issuance of Sri Lanka , the Central Bank said.
The issue has been oversubscribed 8.3 times to US$ 4.25 billion within six hours from 287 accounts with well-diversified investors, according to the Central Bank.
Asian investors subscribed 32 percent, Europe 22 percent and the US at 46 percent. Global Fund Managers were the largest investors, representing 81 percent, with Banks, Private Banks and insurance agencies taking 13 percent, 3 percent and 3 percent respectively.
Sri Lanka ‘s previous five-year Issuances in 2007, 2009 and January 2014 were priced at yields of 8.25 percent, 7.40 percent and 6.00 percent respectively.