In a significant move, the Colombo Stock Exchange (CSE) has introduced High-Yield Bonds, allowing companies with ratings below investment grade to raise capital by way of issuing bonds via the CSE. Unlike standard listed corporate bonds which require a minimum rating of at least one notch above investment grade, this initiative enables companies that previously faced challenges in meeting such stringent requirements to access capital markets more easily.
Only specific types of companies, such as those regulated by the Central Bank of Sri Lanka or the Insurance Regulatory Commission of Sri Lanka, are eligible to issue these High-Yield Bonds. This ensures that regulated entities, including banks, non-banking financial institutions, and insurance companies, can participate in this new financing opportunity.
While these bonds will be listed on the CSE, trading will occur on the Over-the-Counter (OTC) Platform, restricted to “qualified investors”. These investors, similar to those in Basel III-compliant securities, are typically more experienced in managing risks. They have the opportunity to diversify their portfolios by investing in bonds that offer potentially higher returns but come with increased risk, as they often manage portfolios with a broader risk appetite.
