News
SriLankan seeks massive bond issue to buy aircraft
View(s):Sri Lanka’s national carrier SriLankan Airlines now wants to raise US$ 175 million (or more than Rs. 22.7 billion) through an international bond issue to make pre-delivery payments to Airbus Industrie for the ten new aircraft it wants to procure. Whilst seeking approval for this bond issue, Civil Aviation Minister Priyankara Jayaratne has also asked the Cabinet of Ministers to request the Treasury to provide a sovereign guarantee for US$ 50 million (or over Rs 6.5 billion).That is to the Standard Chartered Bank, the lead bank that is raising a US$ 150 million syndicate loan.
From that syndicate loan, SriLankan Airlines wants to repay US$ 130 million that is now due to the Dubai-based Mashreq Bank on a loan of US$ 175 million obtained in 2012. The balance, together with the money to be raised through the international bond issue, is to go as advance payments for new aircraft.Pointing out that the national carrier is in discussions with the Treasury regarding a restructuring of the Mashreq Bank loan, Minister Jayaratne has told his ministerial colleagues that additional financing is required “due to the increasing difficulty in meeting the loan covenants on the net worth of the company.” He has said that new aircraft to replace the aging fleet of 13 wide bodied aircraft will begin arriving from October this year and additional funds are required for this purpose.
The Sunday Times in its issue of April 28 last year revealed exclusively that SriLankan Airlines would buy ten new aircraft from Airbus. Six A 330-300 aircraft with Rolls Royce Trent engines would cost more than US$ 234 million each. Four state-of-the-art Airbus A 350-900 with Rolls Royce XWB engines would each cost more than US$ 283 million.
According to Minister Jayaratne, the amount now outstanding to Mashreq Bank is US$ 130 million. The Board of Directors of the national carrier has appointed Standard Chartered Bank as lead bank and arranged for a US$ 150 million syndicate loan, which he says, will “primarily be used to repay the Mashreq Bank syndicate loan.” According to him, the new loan requires a Treasury guarantee for only 33 per cent of the loan value which amounts to US$ 50 million.
Minister Jayaratne has told his colleagues, “It should be noted that for an additional guarantee of US$ 50 million and by transferring the existing guarantee of US$ 175 million total Treasury guarantee will be US$ 225 million. The SLA will raise financing amounting to US$ 325 million through the International Bond and syndicate loan market.