SriLankan Airlines and the Government of Sri Lanka have announced that they have reached an agreement in principle with the Ad Hoc Group of Bondholders on the financial parameters of the restructuring of its USD 175 million in Guaranteed Bonds due June 2024.

Issuing a joint statement, the two parties said that the agreement was reached with six members of the Ad Hoc Group of Bondholders following restricted discussions during the restricted period, between 23 October and 19 November 2025.

SriLankan Airlines was joined by its financial and legal advisors, Lazard and Norton Rose Fulbright LLP, respectively, while the Ad Hoc Group of Bondholders were joined by their legal advisor, Akin Gump Strauss Hauer & Feld. The Ad Hoc Group of Bondholders controls approximately 55% the aggregate outstanding amount of the USD 175 million in Guaranteed Bonds (Notes). 

Under the in-principle agreed terms, and subject to the successful implementation of the restructuring in accordance with such terms, the Government will be discharged from its liability pursuant to the guarantee and benefit from substantial debt and immediate liquidity relief to maintain the hard-fought long-term sustainability of its public finances.

Under the agreed terms, the restructuring will include a 15% haircut on the total claim amount of the Notes, with the remaining balance to be exchanged for a combination of cash and medium-term Government bonds carrying a 4% interest rate.  

The in-principle agreed terms for the restructuring remain subject to final approval from Sri Lanka’s Cabinet of Ministers, as well as the non-objections of the International Monetary Fund (IMF) and Sri Lanka’s official Creditor Committee, pursuant to the Government’s commitments taken in the context of Sri Lanka’s overall public debt restructuring exercise. 

The terms of the in-principle agreed restructuring have been communicated to Sri Lanka’s Official Creditor Committee for their non-objection, as well as the IMF, to ensure compliance with Sri Lanka’s long-term debt sustainability. Upon their confirmation, the Parties expect to be able to implement the transaction by the end of the year. 

The implementation of the in-principle agreed terms will allow the company to complete the full normalization of its relations with its external creditors and to focus on ensuring the continuation of its operations. 

Full statement: 

The post USD 175M debt restructuring : SriLankan Airlines, Government reach in-principle deal with Bondholders appeared first on Newswire.

Sri Lanka has successfully concluded discussions with the ad-hoc Bondholder Committee of International Sovereign Bonds (ISBs), reaching an agreement on restructuring terms, State Minister of Finance Shehan Semasinghe announced on Thursday. 

Taking to ‘X’, State Minister Semasinghe revealed that International Sovereign Bonds account for USD 12.5 billion out of the total external debt of USD 37 billion. 

The State Minister pointed out that this agreement is a crucial step in our efforts to restore debt sustainability in the country. 

He further said that these restructuring terms now require approval from the official creditor committee and the International Monetary Fund (IMF) to confirm the Comparability of Treatment and assess compliance with Debt Sustainability targets. 

“This marks another key milestone in our journey towards economic revival and strengthening. This milestone could be considered a reflection of the ambitious economic and governance reforms carried out by the government in line with the best practices adopted globally. These reforms have been pivotal in creating a more resilient and sustainable economic framework for the future,” he added. 

Sri Lanka defaulted for the first time on its foreign debt in May 2022 after its economy was driven to the brink by a slump in foreign exchange reserves.

Restructuring international bonds was one of the key conditions set by the IMF under a $2.9 billion bailout programme that helped Sri Lanka tame inflation, stabilise its currency, and improve public finances.

The latest agreement comes after Sri Lanka held a second round of formal talks with bondholders this week.

According to Reuters, the framework proposes a 28% haircut on face value and an 11% reduction on past interest with payments on the interest component to start in September. 

The outline proposes to swap four existing dollar-denominated bonds for a bundle of three fixed-income instruments. 

One is a standard or so-called “plain vanilla” bond that has a coupon of 4% and matures in 2028. The second is a series of macro-linked bonds, where payouts and principal will be adjusted according to the country’s economic performance – downwards in case the economy fails to hit the IMF baseline projections, and upwards if the economy outperforms.

A third instrument would be a so-called governance-linked bond. While the government’s regulatory statement did not detail the parameters to which the payout was linked, a source familiar with the situation said the country would have to pay investors less if it managed to achieve reforms demanded by the IMF and hit tax revenue targets.

The agreements come in the backdrop of Sri Lanka signing in late June an agreement with creditor nations including Japan, India and China to restructure about $10 billion in bilateral debt.

Sri Lanka now needs to present the proposal to all its bondholders who need to agree to the deal for the restructuring to be finalised.

The country, whose total external debt is $37 billion, also has to finalise arrangements with the China Development Bank to restructure debt of $2.2 billion, according to the latest finance ministry data. (Newswire)

The post Sri Lanka reaches provisional deal with bondholders appeared first on Newswire.

The Opposition, Samagi Jana Balawegaya (SJB) has expressed disappointment over the government’s lack of transparency related to the restricted discussions held with the Ad Hoc Group of Bondholders of its International Sovereign Bonds (ISBs).

The government, in a statement Tuesday, announced that it has held restricted discussions over the past three weeks (the “Restricted Period”) with nine members of the steering committee who agreed to take part in the restricted discussions (the “Steering Committee”) of the Ad Hoc Group of Bondholders (the “Group”, and together with Sri Lanka, the “Parties”) of its International Sovereign Bonds (ISBs).

The statement further said that despite constructive discussions, the Parties did not agree on restructuring terms, while the Steering Committee did not agree to an extension of the restricted discussions upon expiration of the current Restricted Period.

Commenting on the statement, SJB MP Dr. Harsha de Silva said the SJB was disappointed that there has been absolutely no transparency in the government’s debt restructuring process even though the SJB had requested for same.

“In fact, I personally requested for a meeting with the relevant stakeholders both as the economics spokesperson for the main opposition SJB and as the Chairman of the COPF. That opportunity was not provided, instead, a meeting with government officials was arranged to discuss the IMF program which we had no reason to attend as we anyway met the delegation during their visits and exchanged views on the same,” he said in a statement. 

MP de Silva pointed out that from the press note, it was obvious that the government had failed to strike a deal favourable to the people of Sri Lanka, adding “We acknowledge, however, that it is better to withdraw from the discussions than to agree to a bad deal.”

“Having said that, the statement by the head of Hon President’s staff that the two sides agreed on two of the four issues is not accurate when the note categorically states that no agreement had been reached, only that they ‘came closer to meeting of minds’ if a significant additional payment was made and even then, contingent upon the government side agreeing to the bondholders remaining conditions.”

He further that it was clear that the participating bondholders do not want to move away from the original macro-linked bond (MLB) structure they proposed based on the performance of the Sri Lanka economy to be measured on their much higher ‘alternative baseline’ as opposed to that of the IMF. 

“The main problem with this approach from the point of view of Sri Lanka is with their proposed structure of sharing the upside. It is not acceptable given the pain already incurred and will be incurred for decades to come by domestic creditors forced upon by the domestic debt restructuring. It is now clear the alternative restructuring proposal by the government consisting of a mix of plain vanilla and MLB has been rejected by the bondholders. We do understand the need for some type of value recovery instrument (VRI) that could be a component of the final restructured series, but we believe that to link the same to every bond takes away the freedom of a future government to manage the nation’s liabilities in the most beneficial way for Sri Lanka. It is possible to discuss the VRI structure that is detachable from the main instrument,” he explained.

MP de Silva, however, expressed satisfaction over the inclusion of a discussion on a possible governance-linked bond (GLB) structure, stating that the SJB would be interested in discussing how that can be worked into a possible instrument to be agreed upon.

He further urged the government to be much more transparent in this restructuring process given that elections are around the corner and that the next government and those to come will be held responsible for honouring the conditions agreed upon by this government in its final months. 

“We are fully aware that any unilateral suspension of meeting any of the agreed payments would mean a second default which would be an absolute disaster,” the SJB MP added. (Newswire)

The post Debt restructuring : “Govt failed to strike a deal favourable to SL” says Harsha appeared first on Newswire.

The Government of Sri Lanka today announced that it has held restricted discussions over the past three weeks (the “Restricted Period”) with nine members of the steering committee who agreed to take part in the restricted discussions (the “Steering Committee”) of the Ad Hoc Group of Bondholders (the “Group”, and together with Sri Lanka, the “Parties”) of its International Sovereign Bonds (“ISBs”).

Sri Lanka was joined by its legal and financial advisors, Clifford Chance and Lazard, respectively, and the restricted members of the Steering Committee were joined by the Group’s legal and financial advisors, White & Case and Rothschild & Co, respectively. 

The Steering Committee as a whole comprises ten of the largest members of the Group, with the Group controlling approximately 50% of the aggregate outstanding amount of ISBs. 

Despite constructive discussions, the Parties did not come to an agreement on restructuring terms. The Steering Committee did not agree to an extension of the restricted discussions upon expiration of the current Restricted Period.

During the Restricted Period, Sri Lanka, the Steering Committee and its advisors met during a two-day working session in London on 27 and 28 March 2024 (the “Meetings”) to discuss the Group’s latest debt treatment proposal, sent to Sri Lanka’s advisors on 11 March 2024 (the “Group’s March Proposal”). 

Prior to the meetings, on 25 March 2024, Sri Lanka had also sent, through its advisors, its own debt treatment proposal to the Group’s advisors (“Sri Lanka’s Proposal”) which was rejected by the Steering Committee. 

Prior to the Meetings, staff at the International Monetary Fund (the “IMF”) provided their preliminary and informal assessment of both Parties’ proposals’ consistency with Sri Lanka’s IMF-supported program (the “IMF-Supported Program”) parameters and debt sustainability objectives. The IMF staff assessment included an analysis of the sum total of restructuring proposals (for official and private creditors) based on agreed deals with certain creditors and the Sri Lankan authorities’ restructuring scenario for other creditors. 

On that basis, the IMF staff concluded that the debt treatment scenario included in Sri Lanka’s Proposal was consistent with the IMF-Supported Program debt sustainability targets, while the scenario included in the Group’s March Proposal was not. IMF staff noted that these were preliminary assessments and the IMF staff would provide final assessments only after the Parties had reached a tentative agreement in principle.

During the Meetings, it was agreed that the primary basis for the discussions would be the Group’s March Proposal. Sri Lanka articulated the main reservations it had in relation to the Group’s proposed Macro-Linked Bond (“MLB”) – while members of the Steering Committee articulated the reasons why they believed the terms of their MLB proposal were fair and reasonable.

The Steering Committee also suggested the possible introduction of a Governance Linked Bond, which Sri Lanka said it would consider subject to being provided with more details of this proposal. 

Read more : https://www.londonstockexchange.com/news-article/70ZL/conclusion-of-initial-restricted-discussions/16425024 (Newswire)

The post Restricted discussions with Ad Hoc Group of Bondholders : Details revealed appeared first on Newswire.