WikiLeaks: Bond Issue 2007; ‘UNP Will Not Be Able To Honour Repayment’ – Ranil Wrote To JP Morgan, Barclays & HSBC
May 25, 2015
“The CEO of HSBC in Sri Lanka discounted the UNP threat as ‘silly… political tub-thumping.’ He said there was no way a future UNP government would voluntarily default, and was confident that international markets would be unconcerned by the UNP position. Other international bank and credit rating agency reps gave Econoff the same assessment.” the US Embassy Colombo informed Washington.
The Colombo Telegraph found the related leaked cable from theWikiLeaks database. The unclassified cable discusesSri Lanka’s debut sovereign bond issue. The cable was written by the Ambassador Robert O. Blake on September 05, 2007.
The ambassador wrote; “The Government of Sri Lanka plans to issue the country’s first international sovereign bond, in hopes of raising $500 million to fund infrastructure projects. However, the main opposition United National Party has announced that a future UNP government would not honor the bonds, which it claims the country cannot afford. UNP reps told us that their effort to sink the bond issue is primarily political though — an effort to keep the government from being able to buy the continued loyalty of former UNP MPs who joined the government as ministers last January. While markets will likely correctly view the UNP threat as a political move that would never materialize, the timing of the pending bond issue appears to be as bad or worse as sixteen months ago, when the government shelved an earlier plan for a $1 billion sovereign bond issue. Sri Lanka has had little good news to reassure currently skittish international debt markets. Nevertheless, market watchers say that the relatively small bond issue will probably appeal to a sufficient number of international investors who remain interested in diversifying their holdings of high-yielding emerging market debt.
“The Central Bank of Sri Lanka, which will float the bond on behalf of the Government, has selected JP Morgan, Barclays Capital and HSBC as joint lead managers of the issue, from among twelve local and international banks that bid on the role. According to a senior Central Banker, the bank plans an October road show to financial centers like New York, London, Frankfurt, Singapore, and Hong Kong to publicize the planned bond issue.”
