Sri Lanka puts offering on hold
Monday, 10 September 2007
Joe Leahy from Hong Kong
SRI Lanka is expected to put on hold its first foreign sovereign debt offering following the turbulence in global credit markets.
The $500m offering, which Colombo was expected to launch at the end of the summer, has fallen victim to low investor appetite for high-yield issuance.
A resurgence in the island nation's civil war makes such an offering particularly difficult to sell in these conditions.
"It's a very large number coming to the market at a time when things are pretty ugly and there is no pressing need for that kind of money and those kinds of prices," said a person familiar with the deal.
Vietnam is also reviewing plans for a $1.0bn bond issue scheduled for this month because of market conditions.
Spreads on high-yield bonds in Asia have nearly doubled since the end of May, souring the climate for new corporate issuance and also deterring governments from venturing into the market.
"I don't see any high yields being able to price the way the market's going," said Dilip Parameswaran, head of Asian credit research with Calyon in Hong Kong. "This is not just in Asia but also in Europe and the US. There are no transactions going through."
He added that sovereign bonds for countries such as Vietnam, which is becoming a more attractive destination for foreign direct investors, could still be sold if governments were willing to offer higher yields.
The last significant high-yield deal was Saudi Basic Industries' $1.5bn bond issue to support its $11.6bn acquisition of GE Plastics, a record-sized acquisition for the Gulf region.
Sabic was forced to cut the offering by nearly half from an original size of $2.76bn in order to complete the refinancing of its acquisition of General Electrics' plastics division.
Selling the Sri Lankan sovereign would be challenging because of the additional concern over political conditions there, where the war with the separatist Liberation Tigers of Tamil Eelam has escalated over the past year.
Standard & Poor's has placed a B+ rating on long-term Sri Lankan foreign-currency bonds, four notches off investment grade.
"We are not deterred by the current market and we are working toward our plan,'' Ajith Nivard Cabraal governor of the central bank, said in an interview with Bloomberg.
But he added: "Conditions can change overnight."
"Anybody who has been tracking the market very closely on a day-to-day basis will know and this is not peculiar to sovereign bond issuance," said one banker in Mumbai. "There's been limited if any issuance in recent weeks."
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Under syndication arrangement with FE
SRI Lanka is expected to put on hold its first foreign sovereign debt offering following the turbulence in global credit markets.
The $500m offering, which Colombo was expected to launch at the end of the summer, has fallen victim to low investor appetite for high-yield issuance.
A resurgence in the island nation's civil war makes such an offering particularly difficult to sell in these conditions.
"It's a very large number coming to the market at a time when things are pretty ugly and there is no pressing need for that kind of money and those kinds of prices," said a person familiar with the deal.
Vietnam is also reviewing plans for a $1.0bn bond issue scheduled for this month because of market conditions.
Spreads on high-yield bonds in Asia have nearly doubled since the end of May, souring the climate for new corporate issuance and also deterring governments from venturing into the market.
"I don't see any high yields being able to price the way the market's going," said Dilip Parameswaran, head of Asian credit research with Calyon in Hong Kong. "This is not just in Asia but also in Europe and the US. There are no transactions going through."
He added that sovereign bonds for countries such as Vietnam, which is becoming a more attractive destination for foreign direct investors, could still be sold if governments were willing to offer higher yields.
The last significant high-yield deal was Saudi Basic Industries' $1.5bn bond issue to support its $11.6bn acquisition of GE Plastics, a record-sized acquisition for the Gulf region.
Sabic was forced to cut the offering by nearly half from an original size of $2.76bn in order to complete the refinancing of its acquisition of General Electrics' plastics division.
Selling the Sri Lankan sovereign would be challenging because of the additional concern over political conditions there, where the war with the separatist Liberation Tigers of Tamil Eelam has escalated over the past year.
Standard & Poor's has placed a B+ rating on long-term Sri Lankan foreign-currency bonds, four notches off investment grade.
"We are not deterred by the current market and we are working toward our plan,'' Ajith Nivard Cabraal governor of the central bank, said in an interview with Bloomberg.
But he added: "Conditions can change overnight."
"Anybody who has been tracking the market very closely on a day-to-day basis will know and this is not peculiar to sovereign bond issuance," said one banker in Mumbai. "There's been limited if any issuance in recent weeks."
..................................................................
Under syndication arrangement with FE