Sri Lanka rolls over US$693 SLDB tranche after two previous failures

Sri Lanka rolls over US$693 SLDB tranche after two previous failures

2 May 2021 11:06 am

Recession-hit Sri Lanka has managed to roll over US$ 693 million of maturing forex denominated Sri Lanka Development Bonds helped by post-auction subscription for 9 month bonds, Central Bank data showed.

This successful debts roll over has been made after recent failures in the last two auctions of the Sri Lanka Development Bonds (SLDBs) which were heavily under subscribed, several economic experts said.   

In the auction held in November last year for $ 200 million, the Central Bank was able to raise only $ 24.82 million accounting for as much as 67 percent of under subscription, they claimed.  

The auction held in January, which had an offering of $ 200 million raised only $ 43.6 million reflecting under subscription to the tune of 78%. 

 This under subscription reflected the investor concerns with regard to Sri Lanka’s credit worthiness.

The Government has to settle an International Sovereign Bond of $ 1,000 million in July, and Sri Lanka Development Bonds amounting to $ 1,325 million in August this year, they said. 

The debt problem has aggravated due to the difficulties faced by the Government in attracting foreign investors to its dollar-denominated bonds in recent auctions. This restrains the rolling-over of maturing foreign bonds. 

In sturdy market conditions, the bank has sold $ 694.52 million of bonds against a maturing tranche of 693.89 million dollars.

Banks and investors initially bid 652 million dollars for a 750 million dollar auction of SLDB.

The Central Bank’s debt office kept books open till April 30 to sell more bonds at the weighted average rate.

But an initial sale of 152 million US dollars of 9-month bonds was raised to 193 million dollars after the auction taking the total over threshold.

All other bonds were rolled over for periods exceeding 15 months with 200 million dollars in bonds rolled over for three years.

The bonds were rolled over with the debt office willing to pay higher rates at a time with the domestic dollar market is struggling to find foreign exchange and rates are elevated.