|
|
 |
 |
|||
|
|
By Nisthar Cassim (Reproduced from the Daily Mirror of November 2, 2001) Sri Lanka’s first ever US Dollar- denominated Bond issue which opened yesterday was already over-subscribed with the government raising an impressive US $ 103 million (over Rs. 9 billion), financial sources said. The issue’s minimum amount was US $ 50 million and by the stipulated closing date – November 15 the Government was planning to raise around US $ 250 million (nearly Rs. 23 billion). Central bank Governor A.S. Jayawardena told the Daily Mirror yesterday that a decision whether to keep it on till the original date or close it early would be made today. Daily Mirror learns that HNB and Commercial Bank had subscribed up to US $ 25 million each and Citibank around US $ 20 million while around seven banks had responded to the issue on the opening day. More are expected to subscribe in smaller amounts today and next week. “We are very happy with the response and the fact that the issue was oversubscribed on the first day itself,” Mr. Jayawardena said. The success is also reflected on the Government decision to depend on the local banking community to deliver the goods. The Governor said originally the Government was planning to tap the international markets to raise the required funds but abandoned the idea given the volatile global environment especially after the September 11 terrorist attacks in the US. Analysts also said that given the difficult global situation the decision to raise the amount locally had so far paid off. “The Central Bank and the banking sector had done a lot of work in regard to the historic US Dollar Bond auction and the instant success on the first day is a confidence booster for the economy,” they added. Mr. Jayawardena also said that given the fact that it was the first issue, effective pricing and terms and conditions had played a part in making it a success. “More importantly, we have brought down our cost which is positive,” he added. Analysts said that had the government tapped the international market it may have had to pay the London Inter Bank Offered Rate (LIBOR) plus 3% whereas the current local issue restricted only to banks, primary dealers, foreign entities and Non-Resident Sri Lankans, is priced at LIBOR plus 2% average for 3 years. The issue, which has a put option after one year, offers LIBOR+2.25% for two years. Some said that the rates offered were acceptable while others noted it was very good, saying had the Government tapped the international sources it would have had to pay around LIBOR+3% as there is no sovereign credit rating. However Sri Lanka’s track record of servicing foreign debt is excellent, as it has not defaulted so far. “The first issue is a kind of testing the waters and going by the response the structuring has paid off. If the issue is kept open the Government may raise the entire US $ 200 to 250 million. The Government could also be content with US $ 100 million already raised and close the issue and make a fresh offer for the balance with certain changes,” analyst said though adding that these possibilities depend on how desperate the Government is in raising its reserves. As of early October reserves stood at US $ 1.4 billion. Interest payment is semi-annual and minimum subscription is US $ 100,000 and additional amount in multiples of US $ 10,000. The commercial bank ad primary dealers are expected to re-sell these bonds overseas while a secondary market is also envisaged later on. This will ensure that what ever raised would have a positive impact on total reserves rather than in official reserves as at present since most of the funds used to subscribe are from within the country. The commercial banks are expected to do this by utilising their branches or correspondent banks abroad. Central Bank sources said that success in the maiden effort would also go a long way in encouraging the Government to borrow more directly from the international market as Sri Lanka is no more a low in-come country that could enjoy highly concessional loans from donor agencies. “Experience and lessons learnt will enhance Sri Lanka’s ability to go direct to international markets for borrowing,” they said. Central Bank also expects LIBOR to be around 2.2% for some time or dip further.
|
|
Contact
Information: Send mail to