UDA to issue LKR 25 billion debenture ten years after its first LKR 10 billion issuance

The Urban Development Authority (UDA) is issuing debentures worth LKR. 25 billion to raise funds through state banks to finance a large-scale middle income housing scheme, a senior official said.

Nimal Perera, Secretary to the Ministry of Urban Development and Housing, said that the first installment of LKR 5 billion of this debenture issue is expected to be received sometime around next week.

5000 of these houses of large- scale middle income housing scheme funded by the debenture will be built in Colombo, Kandy and Anuradhapura and are offered at up to LKR 10 million for a 2-bedroom apartment at a loan interest of 6.2 percent interest with the repayment period at 30 years at LKR 37, 000 per month.

UDA’s previous LKR 10 billion debenture issue in 2010 has created controversy due to cash flow problems in repayment of investments in maturity in 2015 although there was a treasury guarantee at that time.

Several local and foreign investors who subscribed to UDA’s debenture issue ten years ago have been deprived of their investment due to cash flow problems of the government, informed sources said.

The Ports Authority, Bank of Ceylon, Sri Lanka Insurance Corporation, the National Insurance Trust Fund, Seylan Bank, Commercial Bank, Sampath Bank and HNB Assurance were among the local parties who invested on this UDA’s LKR 10 billion debenture issued in October 2010.

The UDA debenture was listed on the main board of the Colombo Stock Exchange (CSE) and it enables investors to liquidize their debenture before five years, UDA official said, adding that no investor has resorted to it.

CITICORP Investment Bank Singapore Limited has purchased the entire amount of LKR 3 billion allocated for foreign investors, informed sources said, adding that the money was channeled through the local branch of the CITI Bank.

The Ports Authority received LKR 1.7 billion worth of debentures, the National Insurance Trust Fund a sum of LKR 1.045 billion, HNB  Assurance a sum of LKR 115.4 million Bank of Ceylon, and Sri Lanka Insurance got LKR 871 million each.

The three other banks, Seylan bank, Sampath bank and the Commercial Bank each, received LKR 435 million worth of debentures.

This LKR 10 billion debenture was issued with a maturity period of five years and at an interest of 11 percent per annum, 10 percent monthly or a floating rate of Treasury bill plus 75 basis points every six months.

The UDA has announced at that time that the money will be used to build 65,000 housing units for unauthorized dwellers in 800 acres of high value state land in Colombo city. The plan was to use this land for commercial purposes.

An attempt of another LKR 10 billion debenture issue of UDA has been halted by the Securities and Exchange Commission in March 2015 as the Authority has failed to submit its audited accounts of 2012 and 2013.