ECONOMYNEXT – SriLankan Airlines has restructured its defaulted bonds with a 15 percent haircut which will exchange for cash and a 4.00 percent amortizing government bond, a Singapore stock exchange filing 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,” Chairman of SriLankan Airlines Sarath Ganegoda said in the filing.
“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.”
Download SGX statement from SriLankan-Airlines-Bond-Restructure-Statement-EN
The terms of the in-principle agreement were communitcated to Sri Lanka’s Official Creditor Committee and the International Monetary Fund to ensure compliance with Sri Lanka’s long term debt sustainability, the statement said.
“Upon their confirmation, the Parties expect to be able to implement the transaction by the end of the year.”
SriLankan had issued sovereign guaranteed 175 million dollar bond to raise cash as the firm made losses after then President Mahinda Rajapasksa ousted Emirates as the managing shareholder.
Sri Lanka defaulted on its external loans in 2022 following aggressive macro-economic policy to push growth (tax and rate cuts for potential output targeting).
The terms are reproduced below:
Appendix: Terms of the agreement-in-principle reached with the Group
The agreement-in-principle consists of an offer to noteholders to participate in a mandatory and concurrent (i) cash tender offer, and (ii) exchange offer for Government bonds issued under a tap of the Sri Lankan Government 2028 USD 1.20 billion 4.00% bond:
• Cash Tender Offer
– Under the tender offer, the Company and the Government will allocate USD 60 million in cash to finance the voluntary tender of the Notes at a fixed price equivalent to 85% of noteholders’ total claim amount (principal, accrued interest and past due interest of the Notes), as of the effective closing date.
– If the offer is undersubscribed, any allocated and unutilized cash will be used in priority to cover the agreed Group work fee (see below), with the balance re-allocated to buy back additional Notes from consenting noteholders at the same fixed price and on a pro-rata basis.
– Non-consenting noteholders will not receive any cash.
• Exchange Offer
– Under the exchange offer, noteholders will exchange their Notes remaining outstanding after the cash tender for Government bonds of Sri Lanka (2028 USD 1.20 billion 4% bond – the “Government bonds”), which amortize in three installments:
April 2026 (~27.4%), April 2027 (~27.4%), and April 2028 (~45.2%). Government bonds distributed as part of the exchange will be issued via a tap of the existing Government bonds.
– Noteholders who voluntarily exchange their Notes will receive USD 0.85 in principal amount of the Government bonds for every USD 1 of their total claim amount (principal, accrued interest and past due interest) offered and accepted or reallocated into the exchange offer. The exchange offer ratio will be adjusted to reflect the first full interest coupon paid in April 2026 to avoid double-counting of interest.
– Any Notes not voluntarily tendered or exchanged will be mandatorily exchanged for Government bonds, with holders receiving USD 0.75 in principal amount of Government bonds for each USD 1 in total claim (principal, accrued interest and past due interest). The same adjustment in respect of the April interest coupon on the Government bonds will also apply.
• Other key features
– In addition to the approvals set out above, the transaction will only be implemented once an extraordinary resolution of noteholders is passed at a meeting of noteholders to implement the in-principle agreed terms. The extraordinary resolution requires noteholders holding at least 75% in principal amount of the Notes present and voting to vote in favour.
– Members of the Group will also receive a work fee to compensate the Group for the time, cost and expertise devoted throughout the negotiations.
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