The Ad Hoc Group of Bondholders of Sri Lanka has announced its acknowledgment of the progress that Sri Lanka has achieved in negotiations with official sector creditors concerning a preliminary agreement on debt treatment within the framework of its IMF Program.
In line with the Group's previous statement of financing assurances made on February 3, 2023, and in alignment with the goals expressed by official and private sector participants during the Global Sovereign Debt Roundtable, which aims to streamline and make sovereign debt restructuring processes more equitable, the Ad Hoc Group is reaffirming its dedication to collaborate with Sri Lankan authorities to swiftly find a sustainable solution to the nation's international bond debt challenges.
To fulfill this commitment, the Group, represented by its Steering Committee, recently proactively presented its own proposal for restructuring Sri Lanka's outstanding international bonds. This proposal, geared towards providing immediate debt relief, introduces a variety of new securities to be offered to the holders of the existing bonds, including a "Macro-Linked Bond" (MLB).
The MLB represents an inventive financial instrument designed to be both liquid and index-eligible, with its payouts intricately linked to the fluctuations in Sri Lanka's gross domestic product, according to the statement.
This design aims to ensure the acceptability of the instrument to bond market participants while guaranteeing that its cash flows consistently adhere to the Debt Sustainability Analysis targets outlined in Sri Lanka's IMF Program across various macroeconomic scenarios.
The Ad Hoc Group of Bondholders of Sri Lanka firmly believes that its proposed plan, featuring the MLB, has the potential to contribute to the restoration of Sri Lanka's debt sustainability. Furthermore, it is expected to garner widespread support from the current holders of Sri Lanka's international bonds.
Rothschild & Co and White & Case LLP serve as financial and legal advisors to the Ad Hoc Group, respectively.
