Suntel will be entering the listed debenture market with an issue totaling Rs.1 billion opening on November 30, the company announced.

It said that these funds will form a part of a Rs. 3.7 billion financing package. The debenture issue structured and managed by Citi National Investment Bank will be guaranteed by the International Finance Corporation (IFC) (60%) and the NDB (40%).

Suntel said that the debentures will have 5, 6 and 7-year tenures, be listed on the Colombo Stock Exchange, and have a bi-annual coupon to be issued on a fixed rate basis offering an attractive premium above the weighted average treasury bond rate.

The coupon on the debentures will be determined using the 3-year weighted average treasury bond rate from the auction immediately preceding the issue. The 5-year debentures will earn 80 basis points more than this rate while the 6 and 7-year debentures will be paid 105 and 130 basis points over the weighted average.

Suntel which has been here since 1996 has connected over 70,000 telephone lines using wireless loop technology. Its total financing package will include a partially guaranteed syndicated bank loan of Rs. 1.85 billion and a syndicated loan of Rs. 0.85 billion from the NDB and DFCC to make up the full Rs. 3.7 billion.

The company said that the IFC had also expressed willingness to participate in Suntel equity with a US$ 7.5 million investment. It said that this equity contribution and the combined guarantee offered by the IFC and the NDB indicated the confidence placed in the performance and future viability of the company.

Suntel expects the telecom market here to grow steadily in the future. Its Managing Director Hugo Cederschiold, said that the present tele-density of 2.8 lines per 100 people is low in comparison to other countries in the region.

"The debenture issue is definitely very attractive for investors as they can lock in on a fixed interest rate of approximately 20% for five, six and seven years depending on the tenure chosen," he said.