Standard Chartered secures record new 5-year pricing for Sri Lanka Govt.
Thursday, 9 January 2014 00:01
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Standard Chartered was recently mandated Joint Lead Manager and Bookrunner for the Sri Lanka Government Sovereign Bond issue, which was launched on 6 January.
This issue marked the achievement of a unique milestone as it is the first Sovereign Issue for 2014.
The Sri Lanka Government Bond represents the sixth US Dollar benchmark offering in the international bond markets by the Sovereign since 2007. This landmark transaction by Sri Lanka is the first EM sovereign and 144A/RegS issuance in 2014, kick starting the issuance season and highlighting the sophistication and nimbleness of the Issuer.
Standard Chartered’s Head of Origination and Client Coverage Colin Pawley commenting on the Bond Issue said: “The issuance is priced at a yield of 6.00%, inside the theoretical fair value for a new five-year USD bond based on secondary trading levels of the Sovereign’s previously issued bonds. We expect to see a number of Sri Lankan corporates issue similar bonds in 2014 and this landmark issuance will help pave the way for them to tap the international capital markets.”
With the backdrop of Fed taper and a subsequent rise expected in treasury levels, the Sovereign updated the documentation in a tight timeline of three weeks to opportunistically tap the earliest issuance window available in 2014. Given that the Government of Sri Lanka is a regular issuer in the USD bond markets, the Sovereign directly announced the transaction on 6 January at Asia open. The Sovereign also conducted investor calls immediately after announcement to appraise investors of the economic performance of Sri Lanka.
Standard Chartered Director of Financial Institutions Lakshan Goonetilleke stated: “The intraday execution strategy was initiated to ensure that the Sovereign could tap the market swiftly ahead of other potential issuers entering the market later this week. Orders flowed in steadily throughout the day with strong participation witnessed from US investors. The final order book was US$ 3.2 billion, 3.2 times oversubscribed with participation from over 200 accounts.”
The continued support from high quality investors and the rarity value offered by a shorter duration Sovereign offering allowed the Sovereign to price the transaction at 6.00%. With this transaction, Sri Lanka succeeded in achieving a five-year cost of funds which is progressively lower compared to the previous Issuances in 2007 and 2009, which were priced at yields of 8.25% and 7.40% respectively.
Sri Lanka is rapidly consolidating its status as a country on the rise, characterized by strong growth, an increasingly diversified economy, a stable political climate and an improving institutional framework. The economy has witnessed sustainable improvement in economic performance despite the backdrop of an uncertain global economic environment. Sri Lanka also has growing foreign exchange reserves of US$ 7.1 b combined with a declining fiscal deficit of 5.8%.
Standard Chartered Bank has a presence of over 150 years in Sri Lanka and is a Licensed Commercial Bank supervised by the Central Bank of Sri Lanka and is rated AAA (lka) by Fitch Ratings Lanka Ltd.
