Sri Lanka kicks off US$300mn syndicated loan

Feb 18, 2008 (LBO) - Sri Lanka has called for proposals from foreign banks to raise 300 million dollars from a syndicated loan aiming to close the deal by late March or April, officials and bankers said. The Central Bank, which manages the island's public debt, will call a meeting of bankers later this week to explain the purpose of the loan and get the views of bankers, the head of the public debt department C J P Siriwardane said.

Bankers said they were originally asked to submit proposals by February 21, but the closing date would now be extended till after the meeting.

Siriwardane said the government was looking for a March to April deadline to raise the money.

In October 2007, Sri Lanka raised 500 million dollars through a 5-year bond issue at 8.25 percent with the help of JP Morgan, Barclays and HSBC.

"We have invited the same team of top banks and investment banks this time," Siriwardane said.

Two state owned Sri Lankan commercial banks, Bank of Ceylon and People's Bank, have also been invited.

Bank of Ceylon tied up with HSBC for the October sovereign bond.

Central Bank governor Nivard Cabraal said in January that authorities were looking for cost reduction strategies to trim the interest on the sovereign bond as global dollar interest rates continue to fall in the wake of sharp US rate cuts.

Sri Lanka's public debt is managed by a unit of the central bank.

A 2-year floating rate 250 million dollar Sri Lanka Development Bond (SLDB) issued to domestic investors and banks is also maturing on June 28. In September, a further 70 million dollars falls due.

Treasury Secretary P B Jayasundera said earlier the government was keen to extend the tenor of short term dollar borrowings, and was looking at a 3-5 year syndicated loan if market conditions were right.

Last week Standard and Poor's cut the outlook on Sri Lanka's B+ rating to negative from stable. Fitch has rated Sri Lanka a notch higher at BB- also with a negative outlook.

. Updated