Big demand from global investors for SL’s mega $ 2.5 b Sovereign Bond

• $ 1.25 b each 5- and 10-year tenure offerings draw $ 6.5 b bids from over 400 investors
• Over 65% of allocations to investors based in the US, over 24% in Europe and over 6% in Asia
• Majority of investors are fund managers; insurance, pension funds and banks chip in
• Coupon of 5.75% for 5-year and 6.75% for 10-year tranches
• CB says strong reflection of the international investor community’s continued support for Sri Lanka
• HSBC, Standard Chartered Bank, Citigroup, Deutsche Bank and JP Morgan act as Joint Lead Managers and Bookrunners

Sri Lanka’s largest ever Sovereign Bond issue with a combined value of $ 2.5 billion successfully concluded late last week, drawing widespread demand from global investors and enabling the Central Bank to close the issuance at attractive pricing with the help of Joint Lead Managers and Bookrunners.

On 11 April 2018, the Central Bank, on behalf of the Government, marked its return to the US dollar bond markets with a successful issuance of a new $ 1.25 billion 5-year and $ 1.25 billion 10-year Senior Unsecured Fixed Rate Notes with maturity dates of 18 April 2023 and 18 April 2028 respectively.

The notes have been rated B1, B+ and B+ by Moody’s Investors Service, Standard and Poor’s and Fitch Ratings respectively.

The Central Bank said the issue marked Sri Lanka’s 12th US dollar benchmark offering in the international bond markets since 2007.

“This also represents the largest offshore bond offering ever by Sri Lanka and is a strong reflection of the international investor community’s continued support for Sri Lanka through the years,” it added. Citigroup, Deutsche Bank, HSBC, J.P. Morgan and Standard Chartered Bank acted as the Joint Lead Managers and Bookrunners on this successful transaction.

Identifying a supportive issuance window in a challenging market environment, Sri Lanka announced the transaction during the Asia morning of 11 April 2018. The joint syndicates released terms and initial price guidance for the new 5-year and 10-year tranches at 6.00% and 7.00% areas, respectively. The transaction saw strong interest from a wide range of high quality investors, which allowed the issuer to tighten price guidance by 25 bps each across both tranches.

The notes eventually priced during New York hours, well inside the initial price guidance with a coupon of 5.75% and 6.75% for new 5-year and 10-year tranches respectively.

The final order book stood at $ 3 billion across more than 235 accounts for the five-year tranche and $ 3.5 billion across more than 190 accounts for the 10-year tranche.

“This clearly reflects investors’ continued confidence in Sri Lanka and its economic outlook,” the Central Bank said.

It also said the order book was well diversified across both tranches. The five-year tranche saw allocations of 66% to the US, 24% to Europe and the remaining 10% to Asia. By investor type, the split was 92% to fund managers, 5% to insurance and pension funds, 2% to banks and 1% to private banks. The 10-year tranche saw allocations of 65% to the US, 29% to Europe and the remaining 6% to Asia. By investor type, the split was similar to the five-year tranche i.e. 92% to fund managers, 5% to insurance and pension funds, 2% to banks and 1% to private banks.

In a related statement HSBC Sri Lanka and Maldives CEO Mark Prothero said: “The sovereign announced a dual tranche offering on 11 April 2018 and once again displayed its savviness to remain nimble and responsive to market conditions and successfully capturing a stable market window. This transaction signals the continued confidence placed by the international investor community in the country’s strong credit and growth story.”

HSBC, which has partnered with the Sri Lanka Sovereign on all of its international bond issuances since 2007, also said it was proud to support the country on its growth journey.

Standard Chartered Chief Executive Officer Jim McCabe said: “We are proud to be part of this success as this represents the largest ever bond offering by the Democratic Socialist Republic of Sri Lanka and incidentally is the seventh consecutive USD Bond offering Mandate for Standard Chartered. This also confirms the investor sentiment towards Sri Lanka and its continued growth story as we are committed to the development of the country and are here for good.”