COLOMBO, June 13 (Reuters) - Sri Lanka’s central bank said it had raised $150 million through a syndicated loan to finance state infrastructure projects in 2008, a day after Fitch Ratings expressed concerns with the country’s increasing borrowings.
The loan will be provided by a consortium of major international banks and will contain a ‘greenshoe option’, the central bank said in a statement late on Thursday.
This option will give the government some flexibility to raise the loan to $250 million, depending on investor appetite.
“The deal was signed between nine banks and ST (Secretary to the Treasury),” C.J.P. Siriwardena, superintendent of public debt department at the central bank, told Reuters.
“(Standard) Chartered bank was the arranger. It is a club arrangement and there are nine banks.”
The loan has a 3-year maturity with a yearly put option and cost of U.S. dollar 6-month LIBOR plus a margin of 250 basis points per annum, the central bank said.
“The syndicated loan is consistent with the annual borrowing programme approved by parliament under the Annual Appropriation Act for year 2008, the central bank added.
Fitch Ratings said on Thursday it was concerned about Sri Lanka’s increasing foreign commercial borrowings because it exposes the country to more currency and interest rate risk.
“(There are) currency risks because it is borrowing in foreign currency, and interest rate risk, because it is borrowing on commercial terms,” James McCormack, head of Fitch’s Asia sovereign ratings told Reuters in an interview from Hong Kong.
“That is something from the rating perspective I would prefer not to see,” he said.
Sri Lanka launched a 5-year $500 million bond LK032736246= in October — the country’s first sovereign bond with a yield of 8.25 percent to finance a raft of infrastructure projects.
The central bank’s 2007 annual report showed non-concessional foreign debt in 2007 had risen 282 percent to 226.6 billion rupees ($2.1 billion) compared to a year earlier, mainly due to a $500 million bond inflow.
But the central bank said on Thursday foreign borrowings were under control.
“The borrowing requirement is consistent with the 7 percent budget deficit for 2008,” Nandalal Weerasinghe, the chief economist and director of the economic research department at the central bank told Reuters.
($1 = 107.8 Sri Lankan rupees)
Editing by Jacqueline Wong