Sri Lanka's central bank has turned to Japan to bolster the debt-ridden South Asian island's flagging international reserves. It is putting the final touches on a plan to issue $500 million in samurai bonds, marking the country's first foray into the Japanese market.
The yen-denominated bond issue got a shot in the arm after the Japan Bank for International Cooperation agreed to give a 95percent guarantee following negotiations with Sri Lanka's central bank. The Sri Lankan government has approved three companies - Mizuho Securities, SMBC Nikko Securities and Mitsubishi UFJ Morgan Stanley Securities - as lead managers for the sale.
"The clincher for the samurai bond is JBIC giving a guarantee," said a person in the financial industry familiar with the matter. "This is the first time Sri Lanka is benefiting from such a third-party guarantee."
Sri Lanka has received government-to-government loans from Japan for decades, with much of the money going to infrastructure projects such as upgrades to Colombo's port. Japan holds 10percent of the country's $55 billion in foreign debt, a share now matched by China, whose loans for a spate of big new projects...