CB Chief urges more corporates to go for bonds after BOC’s mega success

Reuters: The Central Bank on Friday asked the country’s corporates to raise funds through bonds, after State-owned Bank of Ceylon raised $ 500 million via a benchmark five-year paper at a lower-than-expected price with high demand.

Bank of Ceylon’s bond, Sri Lanka’s largest so far, was priced at a yield of 6.875 per cent, the tight end of the 6.875-7 per cent guidance, and was oversubscribed by 7.7 times with total orders received amounting to $ 3.86 billion.

“I think more Sri Lankan corporates should go for this kind of bond issue,” Central Bank Governor Ajith Nivard Cabraal told Reuters. “This is far better price. It took five years to see the fruition of the benchmark we set in 2007.”

The price is better than Sri Lanka’s debut sovereign $ 500 million, five-year sovereign bond which was sold at 8.25 per cent in 2007 and below a 7.4 per cent yield, the price it got for a similar 2009 sovereign paper.

Although Sri Lankan corporates substantial funding, they are reluctant to go for bond issues as their requirements are much lower than a benchmark size.

“This shows there is a huge demand for Sri Lankan paper and other corporates should take this advantage,” Cabraal said.

Sri Lanka is likely to refloat its debut sovereign bond later this year.

However, Cabraal said the Central Bank had not yet decided the timing for the bond refloat.

Sri Lanka raised $ 3 billion for infrastructure projects via four sovereign bonds since 2007 and two $ 1 billion, 10-year bonds sold in 2010 and 2011.