Sri Lanka’s debut International Sovereign Bond for US $ 500 million has been oversubscribed more thrice when bids closed yesterday. The bonds have a 5-year maturity at 8.25 % per annum. 

The distribution of investors in the Bond Issue was 40% from the USA and 30% each from Europe and the Middle East, and Asia respectively. 

This spread of investors indicates the positive outlook on Sri Lanka’s economy, and the country’s unblemished debt service record among international financial investors. 

The oversubscription of the Sovereign Bond demonstrates that the international financial community has accepted the remarkable resilience the Sri Lankan economy has displayed despite many shocks, over a long period of time, sustaining negative growth only once in recent years, in 2001. 

Leading establishments in international finance JP Morgan, HSBC and Barclay’s Capital were Lead Managers to the Sovereign Bond issue for the Government of Sri Lanka, and the Bank of Ceylon was Co-Manager.  

Investors have noted that the Sri Lankan economy expanded at 7.4 per cent last year, its fastest rate for more than decades, despite the shocks of international fuel prices, terrorist violence, adverse weather conditions affecting agriculture production, floods, landslides and similar natural disasters affecting production. The expansion of the economy was underpinned by rising domestic and foreign investment and record inflows of remittances from abroad.  

The net proceeds of the bond issue will be utilized by the Government to supplement available concessional funds to develop infrastructure projects that have been previously approved by the Government and included in the current 2007 Budget, including in areas such as electricity generation, water supply, roads, ports, roads and railways development, especially under the Mahinda Randora programme. 

The oversubscription of the Bond Issue by more than three times the offer was possible despite many attempts by sections the Opposition to obstruct the issue; a vigorous publicity campaign against the issue and the nation both locally and abroad; with leading members of the Opposition even threatening HSBC, one of the managers of the issue, with having its banking license cancelled if it went ahead with the issue. 

The success of Sri Lanka’s inaugural international sovereign bond issue will also help open the door for Sri Lankan corporate sector to tap the international markets. 

A spokesman for the Presidential Secretariat said: “The oversubscription to the Sri Lanka Sovereign Bond indicates the confidence the international financial investors have in Sri Lanka and their willingness to be partners in our progress.  

As the investors were informed, proceeds of the Sovereign Bond will help generate additional growth and also sustain the growth momentum.”  (PRIU)

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Last Updated Date: October 18, 2007 - 6.15 GMT