SERENDIPITYA MIDST SOVEREIGN DEBT TURMOIL

Locked out of international capital markets weighed down by its junk CCC credit rating and the economy in a tailspin, daunting prospects of a sovereign debt default or a humbling restructure, or a painful IMF rescue package looms over Sri Lanka. Amidst the gloom is a silver lining: The World Bank private sector arm, triple-A rated IFC issued its first rupee-denominated bond.

The rupee-denominated Serendib Bond, named after one of the country’s names in antiquity, will raise an equivalent of $5 million from international capital markets. “It is a significant milestone towards ensuring that the private sector has access to long-term offshore financing in local currency—while hedging foreign exchange risks—at a critical time,” the IFC said in a statement.

In introducing the Sri Lankan rupee to the international capital markets with Serendib Bonds, IFC said it has created a benchmark for future rupee bond issuance and provide offshore investors with the ability to gain exposure to the currency.

Hector Gomez Ang, IFC Regional Director for South Asia, said the landmark transaction would encourage the private sector to invest in the future of Sri Lanka, paving the way for job creation and inclusive and sustainable growth.

IFC has issued capital market instruments in local currencies and green and other labelled bonds in the past. IFC has issued bonds in about 80 local emerging market currencies – from Armenian dram to Uzbek som and Zambian kwacha. In November 2019, IFC issued the first-ever inaugural Taka Bangla Bond in the London Stock Exchange—raising the international profile of the Bangladeshi currency. It has supported clients in accessing the capital markets as an anchor investor in new issuances that helps to bridge the financing gap in emerging markets.

The $5 million equivalent rupee bond will finance Sunshine Consumer Lanka Ltd, a subsidiary of Sunshine Holdings PLC, IFC said in a statement. “The investment will support the domestic confectionary supply chain and help strengthen the overall competitiveness of the fast-moving consumer goods (FMCG) sector in the country,” it said.

Vish Govindasamy, Group Managing Director of Sunshine Holdings, said the IFC partnership enables the company to access global credit markets to grow the business through diversification and expansion in the consumer goods sector. “The Serendib Bond protects our business from exchange rate volatility, interest rate hikes while giving us access to foreign credit markets to grow the business,” he said.