HSBC Sri Lanka secures fourth consecutive Sovereign bond issue

HSBC acted as Joint Lead Manager, Bookrunner and Sovereign Rating Adviser on the Democratic Socialist Republic of Sri Lanka US$ 1 billion 10 year 144A/Reg.S bond offering.

Being the only bank with a local presence, the latest bond issue comes in the wake of the bank winning all of the three previous Bond mandates by the Government of Sri Lanka with its inaugural issue in 2007, followed by issues in 2009 and 2010.

The final book stood in excess of $7.5 billion of orders from 315 accounts, which is an exceptional achievement for Sri Lanka given the volatile market backdrop.

Senior Investment Banking and Financial Institutions Group Manager Lakshan Goonetilleke stated: “The demand represents a strong vote of confidence from international investors in the progress made in Sri Lanka and its excellent economic prospects.

Execution was intra-day, minimising market risk for the issuer. Pricing with a 6.25% yield at the tight end of revised guidance, with negligible new issue concession, reflecting the strong order book and positive growth story of Sri Lanka.” The deal appealed to the US emerging market and global funds, which saw rarity value in the deal. Sri Lanka tapped the market just 10 months ago, but has fewer outstanding bonds than Indonesia and the Philippines.

Sri Lanka also received a vote of confidence from the rating agencies. Fitch upgraded its rating on Sri Lanka to BB- from B+ on 18 July, citing the country’s stabilisation and economic recovery under the IMF programme, as well as its efforts to address its budget deficit.

Moody’s and S&P both revised their outlooks on Sri Lanka to positive but kept their ratings at B1 and B+ respectively.

HSBC Sri Lanka and Maldives Chief Executive Officer Nick Nicolaou said: “HSBC has the strongest debt capital market capabilities in Asia and this bond issue stands testament to the ability we have in closing large financial deals. We will continue to support the Government in this space, as well as the corporate sector in various infrastructure development projects, in line with national priorities.”