Saturday Apr 20, 2024
Saturday Apr 20, 2024
Thursday, 19 May 2022 00:28 - - {{hitsCtrl.values.hits}}
Sri Lanka yesterday succumbed to an embarrassing “hard default” as the grace period for the International Sovereign Bonds (ISB) Coupon payment lapsed.
Last month Sri Lanka announced a pre-emptive negotiated default of all outstanding debt as of 12 April.
On 18 April ISB Coupon worth $ 78 million fell due and those had 30 days to obtain “Consent Solicitation” from all ISB holders for payment suspension by 18 May. The Daily FT last Friday exclusively reported the looming hard default.
However, political instability following the economic crisis and social unrest derailed the next steps following the pre-emptive default announced last month.
Creditors were hoping that Sri Lanka would get its act together to appoint financial advisors and legal consultants for debt restructuring. This process could have enabled the Government to obtain “Consent Solicitation” from all ISB holders for non-payment.
The matter was raised in Parliament yesterday by SJB MP Dr. Harsha de Silva and Prime Minister Ranil Wickremesinghe explained the crisis whilst former Finance Minister Ali Sabry also detailed efforts that went on.
He said preliminary work towards appointing Financial Advisors and Legal Consultants was completed and Treasury was awaiting Cabinet nod and in the absence of a fully-fledged Cabinet, the matter is pending. The Government received over 20 expressions of interest, each for the two roles, and most qualified parties have been short-listed for a final Cabinet decision.
Soon after the Government announced a pre-emptive default, rating agencies downgraded Sri Lanka to ‘C’ from ‘CC’. It said Sri Lanka will be further downgraded to restricted default ‘RD’ once a payment on an issuance is missed and the grace period has expired.
As per the Ministry of Finance debt suspension list, apart from $ 78 million ISB Coupon that fell due on 18 April, some of the others that fell due until 11 May included $ 51.38 million ISB Coupon 3 May, and $ 46.5 million ISB Coupon 11 May.
Those falling due from 20 May includes $ 19.9 million ISB Coupon on 3 June, $ 15.88 million ISB Coupon on 28 June, a further $ 34.13 million on 18 July and $ 1 billion ISB Maturity on 25 July. Debt suspended include IMF debt repayment and those due to other lenders.
