$ 200 m loan facility given:

Emirates NBD Capital syndicates with BoC

By Gamini Warushamana

Emirates NBD Capital Ltd, one of the largest financial institutions in the Middle East agreed to participate in the Sri Lankan financial market, offering range of investment banking and Islamic banking products.

Emirates NBD has been in Sri Lanka for the past several years and can play a greater role in linking the capital market in the two regions, the Middle East and Indian Sub Continent, said CEO of Emirates NBD, Mohammad Kamran Wajid at the signing of a syndicated loan agreement with the Bank of Ceylon (BoC). The ceremony took place in Colombo last week.

"If we can work together we can easily double the liquidity in the capital market and Emirates NBD can facilitate Sri Lankan financial institutions to launch operations in the Middle East. We do not have a branch network here and we work through partnerships with local financial institutions and we can help them enter the Middle East market in the same way," he said.

The Bank of Ceylon raised a $ 200 million syndicated loan for trade finance and general corporate purposes. The BoC intended to raise $ 150 million and the facility was well received in the market with the total book size reaching $ 300 million during the syndication, oversubscribed by 100 percent.

The facility was closed at $ 200 million. The annual interest rate, three months LIBOR + 2.75 is attractive and indicates the strength and the confidence placed by international investors in BoC, bank officials said.

Emirates NBD Capital Ltd is one of the leading financial institutions with a strong track record in the syndicated loan market. It acted as the initial mandated lead arranger and the sole book runner and completed the transaction in record time along with a number of leading banks.

Fourteen other lenders participated in the syndication, with Standard Chartered Bank, The Commercial Bank of Qatar, Gulf Bank K.S.C., Burgan Bank S.A.K, Doha Bank Q.S.C and National Bank of Abu Dhabi among them. Acting chairman of BoC, Raju Sivaraman said that BoC, the largest and the most profitable bank in Sri Lanka has been in the syndicated loan market for more than 15 years with an unblemished track record and this syndication was concluded at the lowest all inclusive rate of below three percent per annum.

Economic analysts said that this syndicated loan facility indicates the resilience of the Sri Lankan economy and the development of the capital market in the country. The government has relaxed exchange control regulations allowing the private sector to enter international capital markets to raise funds.

The Government's commercial borrowings too have increased significantly over the past few years and today the government depends heavily on commercial borrowings.

Analysts said that the government's need to borrow from foreign sources arose with weakening export capacity. It needs foreign sources of funding to bridge the gap and as a middle income country today, it lacks concessionary credit sources.

Since 2007, the government has issued five sovereign bonds and has raised $ 4 billion. The threshold limit of the government securities market for foreign investors has also been increased. Regulations that govern foreign borrowing by the private sector have also been eased to encourage private firms and commercial banks to tap foreign sources for funding. The Government has relaxed the ceiling imposed on licensed commercial banks borrowing from foreign sources.

The 2013 Budget permitted banks and corporate entities to borrow up to $ 50 million and $ 10 million, each year for three years without the approval of the Department of Exchange Control.

This BoC syndicated loan facility showcases how the banking sector can exploit the opportunity that is now open for them. Development of the capital market is essential for the economic development of the country, analysts said.