Sri Lanka attracts large demand in latest US dollar bond issuance

Sri Lanka prices dual-tranche offering totaling US$2 billion, comprised of US$500 million for five years, offering a yield of 6.35%, and US$1.5 billion for 10 years with a yield of 7.55%

The Central Bank of Sri Lanka, on behalf of the Democratic Socialist Republic of Sri Lanka, returned to the US dollar bond market on June 24 when it priced a dual-tranche offering totaling US$2 billion.

The issuance comprised US$500 million for five years, offering a yield of 6.35%, and US$1.5 billion for 10 years with a yield of 7.55%. The bond transaction was the second for the sovereign this year following a trade in March in which it printed a US$2.4 billion deal also in dual tranches: US$1 billion for five years and US$1.40 billion for 10 years.

The long 10-year tranche represents the longest tenor issuance to date in the international market, underlining the international investor community’s continued support for Sri Lanka and their confidence in the country’s economic fundamentals and long-term growth prospects.

Also, the long 10-year tranche has been appropriately defined in line with Sri Lanka’s future debt service obligations and debt management strategy.

In executing the transaction, Sri Lanka announced the offering during the morning (local time) of June 24, capitalizing on the conducive market backdrop. The deal arrangers released the terms and initial price guidance for the five-year tranche at 6.60% area and for the long 10-year bond at 7.80% area. The transaction generated strong interest from a wide range of high-quality investors, which allowed the sovereign to tighten the final price guidance to 6.40% (+/- 5bp) on the five-year tranche, and to 7.60% (+/- 5bp) on the long 10-year tranche.

The bonds were eventually priced at the tighter end of the range during New York hours, with a yield of 6.35% for the five-year bonds and 7.55% for the long 10-year bonds, representing price compression of 25bp from the initial guidance for each of the tranches.

The final orderbook amounted in excess of US$1.8 billion across 165 accounts for the five-year tranche and over US$4.4 billion across 290 accounts for the long 10-year tranche, reflecting total subscription of US$6.2 billion – or more than 3x over subscription – clearly highlighting the global investors’ continued confidence in Sri Lanka and their positive outlook on the country’s economic growth story.

The orderbook was well-diversified across both tranches. The five-year tranche saw allocations of 30% to the US, 50% to Europe, the Middle East and Africa (EMEA), and the remaining 20% to Asia. By type of investors, fund managers accounted for the bulk of the paper at 80%, while the remaining 9% was sold to insurance companies, pension funds and corporates; 8% to bank treasury; and 3% to private banks and other investors.

The long 10-year tranche saw allocations of 44% to the US, 40% to EMEA and the remaining 16% to Asia. By investor type, the split was 87% to fund managers, 6% to insurance companies, pension funds and corporates, 5% to bank treasury and 2% to private banks and other investors.

The proceeds from the bonds are intended to meet government expenditures. BOC International, Citi, Deutsche Bank, HSBC, J.P. Morgan, SMBC Nikko and Standard Chartered acted as the joint lead managers and bookrunners for the transaction.

-------------------------------------------------------

Social Media Links (This section can be seen in office only):
Twitter : https://www.theasset.com/article-single.php?id=38053&social=twitter
Linkedin : https://www.theasset.com/article-single.php?id=38053&social=linkedin
Facebook : https://www.theasset.com/article-single.php?id=38053&social=facebook

Date

27 Jun 2019

Channel

Capital Markets

Share this article