SriLankan Airlines has notified the Singapore stock exchange of its default relating to its US$175millon 7% sovereign-guaranteed bond due 2024. The airline referenced the “extreme deterioration of economic conditions” in Sri Lankan on account of its public debt stock becoming “unsustainable” and its “very low level of FX reserves as a result of various events, including the effect of the Covid-19 pandemic and the fallout from the hostilities in Ukraine”. Given the economic crisis currently facing the country, the Government of the Democratic Socialist Republic of Sri Lanka, the 99.52% shareholder of airline company and guarantor of the 2024 Bonds, is reported to be in the process of seeking urgent financial assistance from the International Monetary Fund.
SriLankan Airlines states that the economic situation in Sri Lanka has directly impacted the ongoing operations of the company and it has triggered the 30 day grace period, which applies in respect of any non-payment default in accordance with the terms and conditions of the 2024 Bonds, to “further determine the position of the Company, both in respect of the upcoming coupon payment and its debt obligations more generally”.
SriLankan Airlines has official notified the exchange and debtors that there a default has occurred in the payment of interest on External Indebtedness of the Guarantor in an amount exceeding US$25 million. The airline’s board states that it “intends to establish a transparent process for discussions and communications with all bondholders, and to pursue an active dialogue with bondholders as soon as it is in a position to do so”.