Wednesday, September 29, 2010

Sri Lanka extends yield curve with $1 billion issue

Sri Lanka comes to market with its largest and longest-dated sovereign ever, achieving the objective of extending its yield curve to 10 years.

By Mei Tuicolo | 29 September 2010
Keywords: sri lanka | sovereign | bank of america merrill | baml | hsbc | rbs | bond

The Democratic Socialist Republic of Sri Lanka has sold $1 billion of fixed-rate senior unsecured 10-year bonds -- the largest and longest-dated sovereign from the South Asian island nation ever. The notes pay a 6.25% coupon and were re-offered at par for the same amount of yield. On a spreads basis that translated into 373.1bp over 10-year Treasuries.

The market has seen credit spreads tighten and yields rally recently and as a result, demand for emerging market paper and longer-dated notes has picked up. Sri Lanka's new credit took advantage of both those trends.

A single-B credit doesn’t appeal to everybody, but it is included in the emerging market bond index, which helps and [hence it] appeals to emerging market-based funds globally," said a banker, noting that such funds were a key target as the country went on the road to meet up with key investors.

Sri Lanka was on the road throughout the course of last week, speaking with investors and selling a story not only of an emerging market sovereign credit, but of improved fundamentals surrounding the economy that led to a ratings upgrade by Standard and Poor’s earlier this month.

Following that upgrade, the new 2020 bonds received a B+ rating from both S&P and Fitch.

Based on the strong reception received from investors, the borrower went straight to the market with a yield guidance of 6.5%. The guidance was left unchanged throughout Hong Kong trading day on Monday, and by midday New York time, after US accounts had had a chance to look at the trade, the lead managers confirmed a final guidance of 6.25% to 6.375%. By then, they had already secured an order book of over $3 billion.

By the time the order books closed, the demand totalled $6.5 billion from 310 accounts. Incidentally, this equalled the size of the order book for Sri Lanka's $500 million 2015 sovereign issue last year, which was used as the most comparable benchmark for this deal.

During the Hong Kong trading session yesterday the bonds reached a high of 101.00 on a cash price basis. By the end of the day they had fallen slightly to 100.75 for a yield of 6.15%.

“At 10bp tighter (on a yield basis) this is a very solid performance without leaving too much value on the table for investors,” said one banker familiar with the deal.

The notes were issued under the 144A/Reg-S format and attracted strong interest from US-based accounts, which took 52.5% of the bonds.

“It was an asset that suited investor preferences in the US extremely well,” said one source. “Leading into the trade, there was a strong bid for 10-year assets in the US,” he added.

Europe bought a quarter of the notes offered and Asia took the remaining 22.5%. There were mixed reactions to the allocation with one source commenting that some accounts in Asia were asking why it was heavily skewed towards US accounts.

What it came down to, explained another source, was that the US was able to provide good quality orders, particularly through asset and fund managers.

Indeed, the bonds saw a strong bid from real money accounts, and fund managers and asset managers received 85% of the bonds, while the remainder was evenly distributed between pension and insurance funds, private banks and commercial banks.

Bank of America Merrill Lynch, HSBC and the Royal Bank of Scotland were joint lead managers for the offering.


source - www.financeasia.com

1 comment:

Maestro said...

_______________________________

Our Economy is in Shamble

The consequences, the Great Depression and history tells us, will necessarily be a Formidable Chaos:

Social and political turmoils, and military adventures.

Neither supranational bodies nor governments can propose a plausible solution;

What is Politically Correct is both Mathematically and Morally Wrong!


_______________________________

- Do you feel that your ideology pushed you to make decisions that you wish you had not made?

- Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to -- to

exist, you need an ideology. The question is whether it is accurate or not. And what I'm saying to you is, yes, I found a flaw. I don't know how

significant or permanent it is, but I've been very distressed by that fact.


- You found a flaw in the reality...(!!!???)

- Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

- In other words, you found that your view of the world, your ideology, was not right, it was not working?

- That is -- precisely. No, that's precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence

that it was working exceptionally well.

_______________________________


It is our responsability to create a meaningful increment of jobs, revenues and investments:

We urgently need the only plausible solution that is offered to us:

An Innovative Credit Free, Free Market Economy.

It is your duty to insure your own security and economic survival, no one else will do that for you!


History teaches us that men and nations behave wisely once they have exhausted all other alternatives.

_______________________________

Credit Free Economy
More Jobs, No Debt, No Fear.
Prosperous, Fair and Stable.
http://post-crash.com

_______________________________