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Making a success of the improbable

Issuer: Democratic Socialist Republic of Sri Lanka

Amount: $50 million floating-rate note

Launched: 13 March 1997

Lead manager: Citibank & ING Barings

What makes a deal successful? For Sri Lanka it might simply be that one was possible. Think of the country, and you think of the Tamil Tigers and the war they have been waging against the government for the last 15 years. Sri Lanka's last issue was in 1982, you would hardly expect it to tap the international capital markets now ­ it doesn't even have a rating. But in mid-March, Citibank, which initially won sole mandate, and ING Barings acted as joint book runners for a $50 million floating-rate note (FRN).

And the deal achieved a good price. At a spread over three-month Libor of 150 basis points at par, the government got a price equivalent to a good BB/BB+ rated issuer. This also compares favourably with the 175bp over six-month Libor achieved by Bank of Ceylon for its $12 million FRN issued in September last year. Also, the issue went ahead despite the general widening of spreads for emerging market issuers since mid-February. "We had a large book before we went into the deal which shrank as investors became concerned at the spread situation," says Manuel Carralet, head of debt syndication at ING Barings.

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