Multi-Currency Notes for development - Opportunity Sri Lanka
Multi-Currency Notes for development

Multi-Currency Notes for development

• LOLC unveils multi currency note programme.
• Lanka Orix Leasing Company has identified the issue of corporate notes,bonds under a Multicurrency Medium Term Note Programme as a viable source of funding.
• The company intends to establish a multicurrency medium term note programme on the Singapore Stock Exchange and issue foreign currency denominated notes,bonds for SGD 175 mn or US$ 150 mn thereunder.
• These notes, bonds will also be listed on the Singapore Stock Exchange.
The proposed date of the registration of the Multicurrency Medium Term Programme on the Singapore Stock Exchange is August 8 2016.
However, Notes and Bonds will not be issued on this date.
Further disclosures will be made prior to the issue of any notes, bonds under the Multicurrency Medium Term Programme.
The company has already received the approval from the Central Bank of Sri Lanka and the respective note, bond issuance will take place upon receipt of the approval from the Securities and Exchange Commission.
OSL Take:

The bond market in Sri Lanka commenced its active operations in 1990‟s with the issuance of
medium and long-term bonds, both by the government and the corporate sector.

This process has been accelerated in line with the financial sector reforms and restructuring programme implemented in the last decade.

The debt management policy of the government has substantially reformed by shifting from issuing non-marketable instruments (such as Rupee loans) and short-term marketable instruments (such as Treasury bills) to medium and long-term marketable instruments.

As a result, the government compelled to introduce a long-term marketable and fixed income type new debt instrument; Treasury bond in 1997 to raise funds from the domestic market to finance the government budgetary operations.

Subsequently, government borrowings through non- marketable instruments and short-term marketable instruments have been gradually reduced over the period.

Furthermore, the government has exercised the early retirement facility or “call option” of the existing stock of non-marketable securities to replace them by Treasury bonds to accelerate the development of the bond market.

The gradual increase of the maturity structure of the Treasury bonds enabled the market to establish a medium-term yield curve which has provided a benchmark for the domestic corporate bond market.

Concomitant to this programme, steps have also been taken to develop the market infrastructure.

These include the following:

• Improvement of primary and secondary markets,
• Computerisation of marketinfrastructure,
• Scrip less form issuing system
• Improvement of payments and settlements systems.

The required reforms have also been brought into the legal framework, appropriate to the development of the bond market for the smooth transformation towards the market based debt management.

The authority strengthened the monitoring and regulatory work at the central level, in order to ensure the safety and security of investment made by the public and stability of the overall financial system.

The authority’s continuous commitments on this process and fairly developed domestic money market operations helped develop the bond market, specially government bond market within a relatively shorter time period.

Although, a more active market exists for government bonds, the corporate bond market is still at an under-developed stage.

The government has recognized the importance of developing the corporate bond market to diversify the funding sources in order to reduce the high reliance on the banking system and the equity market.

Further, it would lower the vulnerability of the corporate sector to unforeseen forces as experienced by some of Asian countries during the Asian Financial Crisis.

In this regard, a number of policy measures have been implemented with a view of developing the corporate bond market.

They include the following:

• Mandatory requirement of credit rating and publication of such rating for all varieties of debt instruments.
• Registration requirement of all corporate bonds.
• Entrust regulatory functions of corporate bonds to the Colombo Stock Exchange (CSE).
• Providing facilities to trade corporate bonds in the stock market.

This development process has to be continued with awareness programme to educate both corporate players and investors about the important role that could be played by the bond market providing alternative options for investors to invest their savings and for corporate players to reduce the vulnerability to the system risks by diversifying their alternative funding sources.

The bond market of Sri Lanka needs foreign participation and the move by LOLC to list bonds in the SGX is a good promotional strategy to win overseas investor participation.

The company’s plan to establish a Multicurrency Medium Term Note Programme on the Singapore Stock Exchange and issue foreign currency denominated notes,bonds for SGD 175 mn or US$ 150 mn thereunder will undoubtedly receive favourable response in the near future.
The USD 44 billion Western Region Megapolis Masterplan (WRMM) is promoting an International Financial Centre in its heart of economic activity and this move will further pave way for overseas investors to sample the kind of investments Sri Lanka has to offer in its unity government led development agenda.
For more information on the latest developments in Colombo, consult the biz-friendly OSL Team now.

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Article Code : VBS/AT/10082016/Z-2

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