Sri Lanka has been attracting the attention of big international names of late, more than a billion US dollars pouring into Sri Lanka's rupee debt markets.
Among the buyers of rupee bonds are believed to be the Templeton fund management group whose spokesperson have declined to officially confirm the deal.
Rupee bonds yield over 12.0 percent a year.
Officials said an 8.25 percent dollar denominated sovereign bond issued in 2007 has recently traded above par at 7.80 percent.
Sri Lanka has a 'B' speculative rating from S&P and a 'B' rating from Fitch. Authorities have also been talking to Moody's to bring them on board.
After the lead managers are chosen, a separate issue rating would also be given for the new sovereign bond.
Updated JP Morgan, HSBC, Barclays, UBS, Royal Bank of Scotland (formerly ABN-Amro), Bank of America - Merrill Lynch and Morgan Stanley had bid to manage the bond, LBO learns.
State-run Bank of Ceylon is also in the process, and investment bankers believe it is likely to get a junior book-runner position. Bank of Ceylon was also involved in Sri Lanka's first sovereign bond in 2007.
It is usual to appoint at least one specialist from the three major investment banking regions - the US, Europe and Asia - to float a bond, a person familiar with the deal said.
A sovereign bond usually attracts fees of around 30 basis points, which investment bankers say is somewhat small to be divided among too many players.
In 2007, JP Morgan, HSBC and Barclays Capital were joint lead managers.
Investment bankers say it takes at least a 500 million US dollar bond to attract top names, who vie to add it to their league tables.