Sri Lanka’s Siyapatha Finance 5-year bond coupon hiked by 50bp

ECONOMYNEXT – Siyapatha Finance Plc, a non-bank lender said the coupon of its upcoming listed 5-year bond has been raised to 12.5 percent from 12.0 percent, amid tax changes to government and private bonds.

The bond offer opens on September 25, 2017 seeking subscription of a billion rupees.

Sri Lanka is set to tax corporate bond interest at 5 percent for individual and standard application corporate income tax rates for companies from 2017.

The term sheet issued a few days earlier said that if "any income tax being payable by way of withholding on the interest on the Debentures and an Interest Rate Gross up Event is applicable, the Company shall gross up the Rate of Interest such that a Debenture Holder receives an interest of 12.00% p.a. after the deduction of such withholding tax provided however that the interest so grossed up shall not exceed twelve 12.63% p.a. "

When interest is grossed up, the grossed up rate shall apply to all the Debenture Holders.

In government bonds rates are now quoted net of a 10 percent final withholding tax which will also be removed from April 2016.

The market is still coming to grips with how to price bonds with investors demanding yields based on different expectation, market analysts said.

In the past corporate bonds were priced on a premium to the gross Treasuries yield.  (Colombo/Sept21/2017)

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