Fitch Ratings announced yesterday that it has affirmed the rating on SriLankan Airlines Government-Guaranteed bonds at ‘C’.
These bonds, totaling US$ 175 million with a 7 percent unsecured bond, are due on 25 June 2024. The rating is underpinned by the unconditional and irrevocable guarantee of the government of Sri Lanka (Long-Term Foreign-Currency Issuer Default Rating: ‘RD’).
SriLankan Airlines bonds are rated at ‘C’, considering Fitch’s assessment of average to below-average recovery prospects following a default, aligned with the agency’s Corporates Recovery Ratings and Instrument Ratings Criteria, and Country-Specific Treatment of Recovery Ratings Criteria.
Given the proximity to default, bonds of issuers in such situations exhibit minimal differentiation between ‘RR4’ and ‘RR6’ recoveries. Consequently, Fitch has not assigned a Recovery Rating to the bond.
SriLankan Airlines failed to meet the interest payment due on 25 December 2023 on its guaranteed unsecured bonds, triggering an event of default. This adds to previous missed coupon payments in June 2023 and December 2022, along with events of default resulting from the Sri Lankan government’s 12 April 2022 announcement of a debt moratorium on various categories of sovereign and public-sector entities’ external debt, and subsequent non-payment of interest on the government’s external debt.
SLA’s US dollar bonds fall under the government of Sri Lanka’s debt moratorium. The bond rating reflects Fitch’s assessment of average to below-average recovery prospects for investors, based on Fitch’s Corporates Recovery Ratings and Instrument Ratings Criteria, and Country-Specific Treatment of Recovery Ratings Criteria.
