Private creditors holding $12.5 billion of Sri Lanka’s sovereign debt are slated to engage in further discussions with government officials next week in Washington, according to reports.
Initial talks in late March in London between the ad hoc group of international sovereign bondholders and the Sri Lankan government concluded without a resolution. Bloomberg, citing sources, reported that discussions are scheduled to resume around the International Monetary Fund’s spring meetings in Washington, D.C., starting on April 15. Sri Lanka has defaulted on its $12.5 billion bonds.
The Bondholder Group interfaces with Sri Lanka through its steering committee, which includes heavyweights like BlackRock, Morgan Stanley Investment Management, and Amundi Asset Management. Rothschild & Co. and White & Case LLP served as financial and legal advisors for the bondholders, respectively.
International sovereign bonds constitute a portion of Sri Lanka’s commercial debt, comprising 34% of that segment. Commercial debt represents 40% of the government’s total external debt.
Conversely, multilateral debt constitutes 31% of all external debt.
The IMF, assisting Sri Lanka through a funding facility, has warned that slow progress in debt restructuring could exacerbate the balance of payments and widen financing gaps. The outcome of negotiations with creditors must align with the debt targets of the IMF program.
Sri Lanka’s debt has been deemed unsustainable.
Payments for external public debt service were halted nearly two years ago, on April 12, 2022, by the Central Bank of Sri Lanka. Among the ISB debts that remained unpaid was a $1.25 billion five-year bond with a 5.75% annual interest rate issued on April 18, 2018, maturing on April 18, 2023.
This year, two more bonds are set to mature: a $1 billion, five-year, 6.85% coupon bond issued on March 14, 2019, and a $500 million, five-year, 6.35% coupon bond issued on June 28, 2019.
Source: Sunday times
