Sri Lanka to swap US$12.6 billion of bonds for new notes
Holders of existing notes will be able to swap their holdings until Dec 12
SRI Lanka will issue new notes to holders of its defaulted dollar bonds, as the South Asian nation draws closer to completing the restructuring of its US$43 billion of foreign debt.
The exchange will entail switching US$12.55 billion of bonds for new securities, the Ministry of Finance said in a statement on Tuesday (Nov 26). Holders of existing notes will be able to swap their holdings until Dec 12, the statement said.
“I urge private sector creditors to participate in the debt restructuring process to provide essential relief, thereby laying the groundwork for a bright future for Sri Lanka and its people,” President Anura Kumara Dissanayake said in the statement.
The move is a milestone in Sri Lanka’s efforts to restructure its debt after it fell into default in 2022, and is a step toward restoring access to international markets.
The South Asian nation last week secured initial approval for the next loan tranche from a US$3 billion International Monetary Fund bailout. Final approval would require adequate progress in the debt restructuring, according to the IMF.
The bonds are attractive for investors, said Philip McNicholas, Asia sovereign strategist at Robeco Group in Singapore. The IMF may be inclined to be flexible around its programme as the government seeks to unwind some fiscal austerity measures to support private consumption and growth, he added. Robeco owns Sri Lankan debt.
“A further tailwind may also come from an ongoing post-Covid tourism recovery that could see services exports edge back up toward 10 per cent of gross domestic product and bring in much-needed US dollars to rebuild external buffers and fund the island’s development,” McNicholas said.
Sri Lanka’s dollar bonds were steady after the restructuring announcement. The dollar bonds have handed investors a gain of almost 30 per cent this year, among the best in Asia.
The debt exchange will allow Sri Lanka to reduce its debt servicing repayments by US$9.5 billion over the four-year IMF programme, the statement said.
The finance ministry statement didn’t list any terms for the exchange. BLOOMBERG
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