SriLankan Airlines Creditors Agree to 16% Cut on $175 Million Debt Securities

Kathmandu. SriLankan Airlines, the debt-ridden national flag carrier, announced on Thursday that its creditors have agreed to accept a 16 percent haircut on the principal of its $175 million debt securities. The creditors' agreement to the 16 percent reduction completes the country's debt restructuring process.

The state-owned 'SriLankan Airlines' had also failed to repay its $175 million debt securities maturing in 2024, as the country defaulted on its $46 billion external debt.

The government and SriLankan Airlines stated in a joint press release, "Bondholders representing 97 percent of the outstanding amount have agreed to accept a 16 percent haircut on the bond principal."

The letter offered international bondholders either an immediate cash payment or a new bond with a four percent coupon, maturing in 2028.

Following the agreement, Airlines Chairman Sarath Ganegoda said, "The completion of the agreement is a significant step, allowing us to focus on the future of the company with new optimism."

Sri Lanka had already completed its debt restructuring with private and official creditors early last year as the country emerged from its worst economic recession in 2022.

It received a $2.9 billion bailout loan from the International Monetary Fund (IMF) after facing a shortage of foreign currency even for essential food, fuel, and medicine.

Months of street protests over shortages led to the ousting of then-President Gotabaya Rajapaksa, who faced accusations of mismanagement and corruption.

The IMF required the government to ensure SriLankan Airlines does not burden the national 'balance sheet,' but attempts to sell it have so far failed to attract buyers.

The flag carrier has substantial debt, operating at a loss of approximately 596 billion rupees ($1.9 billion USD) by the end of March last year.