Sri Lanka’s private creditors and government officials are holding a third round of negotiations this week to finalize the restructuring of $12.6 billion in defaulted bonds, according to sources familiar with the matter, Bloomberg reports.
This round of talks—the first since creditors and the government reached a preliminary debt restructuring agreement in early July—marks the third instance in which bondholders have gone “restricted,” preventing them from trading the securities during negotiations, according to the sources who requested anonymity due to the private nature of the discussions.
Representatives for the bondholders and the government did not immediately respond to requests for comment. The creditor group, which includes Amundi SA, BlackRock Inc., and T. Rowe Price, holds about 50% of the outstanding overseas bonds. The committee is represented by legal adviser White & Case LLP and financial adviser Rothschild & Co.
One source indicated that the government aims to reach a final debt agreement before the presidential election scheduled for September 21, with an official statement on the ongoing negotiations expected next week.
The July agreement with private bondholders proposed a 28% reduction in the bonds’ principal and the issuance of macro-linked bonds, whose payouts would be tied to economic growth. The agreement still requires support from the International Monetary Fund and bilateral creditors, including China and France.
Sri Lanka’s bonds due in 2030 are currently trading at around 51.6 cents on the dollar, according to Bloomberg data.
The upcoming presidential election is the first for Sri Lanka since the country fell into its worst economic crisis since gaining independence in 1948. The race is shaping up to be closely contested among three candidates, including the incumbent who negotiated the IMF bailout and a breakaway opposition leader.
Source: Bloomberg / Mint
