CBSL calls for proposals to appoint arrangers for Securitised Financing Arrangement

The Steering Committee of the Central Bank of Sri Lanka (CBSL), through a letter dated 12 November 2021, has requested for competitive proposals from banks/institutional investors/investment houses for consideration to be appointed as counterparts and/or arrangers for the proposed Securitised Financing Arrangement (SFA).

The proposed SFA would be denominated in US dollars, Euro, Chinese renminbi (RMB), Japanese yen, or in any Gulf Co-operation Council (GCC) currency.

The SFA is expected to be raised at a fixed or floating rate for a medium-term tenure. Repayment can be in bullet or in tranches, or on a reducing balance linked to the securitised arrangement, while interest can be paid periodically, as mutually agreed. The proceeds of the SFA will be used for the purposes of financing the expenditure as approved in the annual budget of the Government of Sri Lanka.

According to the letter, banks/institutional investors/investment houses may submit proposals on a standalone basis or collectively, and where the proposal is for appointment as an arranger, the proposal should be submitted by the legal entity proposed to be the arranger. 

The CBSL further claimed that this request for proposals is not a commitment on the part of the Government to accept any proposal. Accordingly, the Government has reserved the right to reject any or all the proposals without providing any reason for such rejection.

The proposals signed by authorised signatory/signatories of the banks/institutional investors/investment houses and addressed to the Superintendent of Public Debt are to be submitted by way of a password-protected document via email by 3 p.m. on or before 30 November.

The proposals presented are expected to clearly delineate the amount and designated currency/currencies in which the SFA is proposed; separate proposal/s are to be submitted for different currencies and different options; for each proposed SFA, cost expressed as a percentage per annum (fixed or floating), proposed securitisation structure, third-party expenses and arrangement fee (if any), estimated lead time (detailed execution timetable), and any other relevant information; proposed composition of the dedicated core project team of the banks/institutional investors/investment houses and related experience of such dedicated core project team; and the cost quoted, which is required to be firm at least for a period of 60 days from the closing date for submission of proposals.

Sri Lanka annually receives around Rs. 700 million in foreign exchange inflows in the form of worker remittances. Considering the strength of this steady foreign currency inflow, the Government had decided to raise medium-term foreign currency financing by securitising foreign currency receipts of the CBSL under the mandatory sale of 10% of workers’ remittances converted into Sri Lankan rupees by licensed banks.

Since the introduction of this mandatory sale requirement on 28 May 2021, an average of $ 25 million per month has been accumulated under this arrangement by the CBSL.

Moreover, the recent focused efforts by the CBSL in collaboration with stakeholder agencies to strengthen remittance flows is expected to result in the surge of such inflows in the coming years.