* Lead managers selected for 5th offshore bond
* Proceeding will be used to refloat debt bond
* Bond pricing will be guided by previous bond yields-cbank
* Bond inflow may help stabilise rupee currency-economist
By Ranga Sirilal and Shihar Aneez
COLOMBO, June 21 (Reuters) - Sri Lanka plans to sell sovereign eurodollar bonds worth up to $1 billion to add to its dollar reserves and give the central bank more room to defend the weakening rupee currency.
The central bank has selected four global investment banks as joint lead managers, bookrunners and underwriters for the proposed issue, it said on Thursday.
The issue will be Sri Lanka's fifth sovereign bond since it first sold a $500 million 5-year euro bond in October 2007.
Central Bank Governor Ajith Nivard Cabraal said the monetary authority will be guided by the joint lead managers on timing of the issuance.
"Our previous bonds are trading at lower than the price they were sold. So we will be naturally guided by them," he said when asked about the yield the central bank expects for the coming bond issue.
The announcement comes as the rupee traded near its record low of 133.60 against the dollar, and traders said the proceeds may be used to stabilise the currency, which has slumped around 17 percent since November.
Amal Sanderatne, an economist and chief executive at Colombo-based Frontier Research, said the bond inflow, together with a falling trade deficit "should help the currency to stabilise."
The central bank and finance ministry have said in the past the proceeds of the bond will be used for the redemption of its debut euro bond, which matures in October this year.
Sri Lanka has been using the bond proceeds to finance a raft of infrastructure projects long neglected due to its protracted civil war and to retire some expensive short-term foreign debt.
The central bank also said it will sell $150 million worth of 3-year Sri Lanka Development bonds to retire maturing securities used for development financing.
Bank of America Merrill Lynch, Barclays Capital , Citibank NA, Hongkong and Shanghai Banking Corporation Limited are the four banks selected by the central bank for the latest global issue.
Since the war ended in 2009, there has been a resurgence in foreign investor interest in the island.
Colombo sold a $1 billion, 10-year euro bond in July 2011 priced at 6.25 percent with an oversubscription of 7.5 times.
The 6.25 percent 2021 bond, which is the most liquid among Sri Lanka's sovereign bonds in the secondary market, was trading at 101.25/102.25 cents on Thursday, which translates to a yield of 6.2 to 6 percent.
The planned new sovereign bond is probably looking at a potential 6.5 percent coupon.
source - in.reuters.com
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