New debt restructuring plan proposed for bond holders
Sri Lanka has submitted a new restructuring proposal to international sovereign bond holders through its financial and legal advisers Lazard and Clifford Chance as ad hoc groups’ debt relief proposal presented earlier is not consistent with the debt sustainability (DSA) targets of the International Monetary Fund (IMF), official sources said.
The government rejected a proposal by this ad hoc group of bondholders, organised by advisers including Rothschild & Co. which submitted a proposal to Sri Lanka that included taking a 20 per cent haircut and issuance of new debt, including a so-called macro-linked bond.
However a memoranda of understanding is to be signed with Paris Club creditors soon paving the way towards finalisation of bilateral creditors debt restructure. Accordingly, financing assurances from bilateral creditors are required only for their debt of US$10.814 billion, two high Finance Ministry officials told the Business Times.
Sri Lanka’s domestic debt optimisation has already been completed and the most challenging economic task of massive debt restructuring process in recent times is scheduled to be completed by June this year, State Minister of Finance Ranjith Siyambalapitiya disclosed.
At the time of the declaration of pre-emptive debt default in April 2022, Sri Lanka had to pay $90 billion and half of it was domestic debt and other half foreign debt, he said adding that the domestic debt optimisation has already been completed.
Accordingly the government has been continuously servicing multilateral debt and the bilateral debt restructuring is now underway, he revealed.
International Sovereign bond restructuring discussions will be completed by April this year, he said.
The total government external debt amounts to $35.052 billion and of this, multilateral debt of $9.499 billion is being serviced and commercial debt amounting to $24.239 billion will be dealt separately following different debt treatment procedures.
A sum of $12.55 billion involved in International Sovereign Bond (ISB) issuance is under negotiations, he noted adding that this was categorised as commercial debt.
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