The Sri Lankan Government and its State-owned carrier, SriLankan Airlines, reported that they reached an agreement in principle with an Ad Hoc Group of Bondholders, on the financial parameters of the restructuring of its debts.
The discussions were held between 23 October and 19 November, relating to its $ 175,000,000 Guaranteed Bonds due June 2024.
The in-principle agreed terms remain subject to final approval from Sri Lanka’s Cabinet of Ministers as well as the non-objection from the International Monetary Fund and Sri Lanka’s Official Creditor Committee.
The implementation of the in-principle agreed terms will allow the company to complete the normalisation of its relations with its external creditors and to focus on ensuring the continuation of its operations.
The company was joined by its financial and legal advisors, Lazard and Norton Rose Fulbright LLP, and the restricted members were joined by their legal advisor, Akin Gump Strauss Hauer C. Feld. The group controls approximately 55% of the aggregate outstanding amount of the Notes.
The company’s Chairperson Sarath Ganegoda said: “We are very pleased to have finally reached an agreement with the Ad Hoc Group of Bondholders, allowing us to now look to the future of our company with greater optimism. We thank them for their patience and for the pragmatic approach they adopted to avoid an unnecessary escalation of this situation, which would have been detrimental to everyone. Our island nation should rely on a well-functioning airline company for its economic prosperity”.
Under the implementation of the restructuring, the Government will be discharged from its liability pursuant to the guarantee and benefit from substantial debt and immediate liquidity relief to maintain the long-term sustainability. The agreement includes a haircut of 15% of the total claim amount pertaining to the Notes while the balance will be exchanged for a mix of cash and medium-term bonds issued by the Government at an interest rate of 4%.
Treasury Secretary at the Ministry of Finance Harshana Suriyapperuma stated: “Today we are taking a new step in the full normalisation of our relations with our external partners and in our efforts to restore our public finances. Thanks to this agreement, 99% of our external debt will now be settled. We count on the support of our official partners to assist us in this crucial new phase, which should also enable us to bolster our credit rating and prepare our eventual return to international capital markets.”
The terms of the in-principle agreed restructuring have been communicated to Sri Lanka’s Official Creditor Committee for their non-objection and the International Monetary Fund to ensure compliance with Sri Lanka’s long-term debt sustainability to implement the transaction by the end of the year.