Economy

Sri Lanka new govt proceeds with ISB deal, Citigroup to manage exchange

Friday October 4, 2024 6:42 pm

ECONOMYNEXT – Sri Lanka is going ahead with a deal to restructure sovereign bond reached last month, with final confirmation on compliance with their parameters having come from both the International Monetary Fund and an Official Creditor Committee.

Sri Lanka said the International Monetary Fund earlier gave informal confirmation that the sovereign bond agreement in principle (AIP) reached in September, with a ‘local option’ domestic banks was in line with the debt sustainability parameters.

Final confirmation was received from both IMF on compliance with its debt sustainability parameters and official creditor committee on comparability of treatment.

“Following the Presidential Elections held in Sri Lanka on Saturday 21st September and the appointment of the new government on 24th of September, the Sri Lanka authorities confirm their endorsement of the program debt targets and the AIP terms as announced on 19th September and confirm their intention to expedite the implementation of the ISBs restructuring transaction in line with these terms.”

Citigroup Global Markets has been appointed to manage the bond exchange which is expected to conclude in about 10 weeks.

“The next step is to begin the implementation work with the advisors to the bondholders, with the aim of completing the ISBs exchange in Q4 2024,” the government said.

“Additionally, the Sri Lankan Authorities will continue discussions with China Development Bank (with which agreement in principle was also reached on September 19th 2024 after months long discussions) to draft and finalize the restructuring agreements as early as possible.

“Sri Lanka will also pursue discussions with its remaining official creditors and other commercial creditors (holding approximately USD 0.9bn in total claims as of end 2023) to finalize negotiations and achieve restructuring agreements.”

“These next steps, which the Sri Lanka aims to expedite promptly enabling to finalize the restructuring of its external debt and advance its economic reform agenda to build a stronger economy.”

Sri Lanka’s International Sovereign Bonds Restructuring – Frequently Asked Questions

On 19Th September 2024, the Democratic Socialist Republic of Sri Lanka (the “Republic”) announced agreements in principle on the restructuring of approximately USD 14.2bn of sovereign debt (as of end 2023) with the holders of its International Sovereign Bonds (the “Bonds”), following negotiations with the Ad Hoc Group of Bondholders (“AHGB”), a representative group of international investors, and the Local Consortium of Sri Lanka (“LCSL”), a representative group of domestic financial institutions.

The Agreement in Principle with the AHGB features a state-contingent debt treatment, with varying levels of debt relief depending on the future economic performance of the country, while the Local Option agreed with the LCSL has been designed to meet the preferences of domestic institutions. The implementation of these agreements will almost bring to a close Sri Lanka’s debt restructuring exercise with the aim of restoring long-term sovereign debt sustainability. Only a handful of smaller creditors, representing a residual of approximately US$ 0.9bn of external sovereign debt yet to be restructured.

1. What is a Macro-Linked Bond and what are the features of a “state-contingent debt
treatment”?

A Macro-Linked Bond (MLB) is a debt instrument for which payments are tied to the economic performance of the issuer — in this case, Sri Lanka. These innovative instruments feature payments which are contingent on a set of future macro-economic variables. For Sri Lanka, the agreed treatment with the AHGB links repayments to the country’s GDP performance during the IMF-supported program, which extends until 2027.
The headline terms of Sri Lanka’s new bonds are based on economic projections made by IMF staff. In 2028, a test will be conducted measuring the average USD nominal GDP from 2025 to 2027, along with an additional control variable measuring cumulative real GDP growth from 2024 to 2027.

This test ensures that the MLBs are linked not only to nominal GDP growth but also to real GDP growth, thus preventing higher repayments to bondholders solely due to an appreciated Sri Lankan rupee (LKR), and protecting the country in case of a recession by providing automatic additional debt relief.

If Sri Lanka’s economy performs better than expected by the IMF staff in both USD nominal and real GDP tern-is, payments linked to the MLBs after 2028 will increase through a combination of capital reinstatement and higher coupons. Conversely, if Sri Lanka’s economy underperforms, payments will be reduced through additional haircuts and lower coupons. This structure ensures thata Sri Lanka’s payments are aligned with the country’s debt repayment capacity, safeguarding long-term sovereign debt sustainability while assuring bondholders that payments will accurately reflect the country’s actual economic performance. This is particularly important given the bondholders’ stated belief that the IMF’s macroeconomic framework underpinning the Debt Sustainability Analysis (DSA) may be overly pessimistic.

2. Why did Sri Lanka have to change the terms agreed with bondholders in July’s Joint
Working Framework achieved with the Ad Hoc Group? What are the consequences for Sri Lanka?

Further to the preliminary agreement reached with the AHGB under the July’s Joint Working Framework) (“JWF”), the Authorities of Sri Lanka submitted the terms of the contemplated debt treatment to the IMF staff and to Sri Lanka’s Official Creditor Committee (“OCC1) to obtain their evaluation with regards to compliance under the IMF DSA parameters and the OCC’s Comparability of Treatment (“CoT”) principles2. In their respective assessments provided in July 2024, both the IMF staff and the OCC indicated that further adjustments to the terms were necessary in order to ensure full compliance with the IMF program targets and the CoT principles.

Consequently, the terms were revised durtng the September negotiations3 to ensure that the agreements reached with both international and local bondholders align with the IMF DSA targets and the CoT principles committed to by Sri Lankan Authorities. The Authorities are now seeking formal confirmation of these assessments from the IMF staff and the OCC, respectively.

The adjustments made since the July Joint Working Framework provide Sri Lanka with additional relief. Compared to July’s JWF, coupon adjustments for the highest threshold were reduced by approximately 160 basis points. Similarly, the coupon adjustments for the second highest threshold were reduced by approximately 60 basis points. Additionally, the average USD nominal GDP thresholds triggering additional payments were shifted upwards, decreasing the likelihood of these additional payments being triggered.

3. Why does the ISBs exchange envisage two options, one for international and one for
local bondholders?

Since the outset of Sri Lanka’s restructuring process, bondholders organized themselves into two groups to negotiate the restructuring of the ISBs. A group representing international bondholders, the AHGB, and a group representing local financial institutions, the LCSL. Following the achievement of the July’s Joint Working Framework, the LCSL expressed their preference for instruments which do not include a state contingent feature, and which include a portion of outstanding ISBs exchanged for LKR instruments.

This was primarily driven by the need to minimize losses incurred upfront by domestic financial institutions and therefore preserve stability in the domestic financial markets.

Accordingly, agreement in principle on a Local Option for members of the LCSL was also agreed on September 19th after negotiations over more than a year, contemplating the exchange of ISBs held by local holders for a mix of new plain vanilla USD and LKR denominated instruments with a reduced aggregate principal amount (“haircut”). It was further agreed that the Local Option would be offered to all bondholders, subject to a cap set at 25% of the aggregate outstanding amount of the ISBs, with priority given to local bondholders, and pro-rata allocation of the balance between consenting international bondholders who have opted for the Local Option.

4. What are the advantages of this ISBs exchange for Sri Lanka?

Under the agreements in principle reached with the AHGB and the LCSL, it is expected that Sri Lanka will benefit from an upfront debt stock reduction of approximately USD 3.2bn, which could increase up to a maximum of USD 4.6bn in case of an economic downturn or decrease to a minimum of USD 2.0bn if Sri Lanka’s economic performance exceeds DSA expectations by a significant margin.

In addition, under the baseline debt treatment scenario, Sri Lanka’s debt service payments over the IMF program period will be reduced by approximately USD 9.5bn, the average maturity of the Bonds extended by over 5 years and interest rates reduced from 6.4% to 4.4% on average.

Under the agreements, holders of the ISBs will be consenting to a present value concession of 40.3% in the baseline scenario, calculated with a discount factor of 11%. In respect of the highest MLB threshold (resulting from the most significant economic outperformance), bondholders’ present value concession relative to the JWF has increased from 27% to 33%.

These agreements will help Sri Lanka to achieve sovereign debt sustainability and hasten the country’s economic recovery and return to international capital markets. This is also a condition for Sri Lanka to unlock additional disbursements from the IMF under the IMF-supported Program and other development partners in the next few years.

5. What are the next steps towards the implementation of the ISBs exchange?

The agreements in principle achieved with bondholders were approved by the Cabinet of Ministers of Sri Lanka on 19th September 2024. Ahead of proceeding with the implementation of the exchange, Sri Lanka now expects to receive formal confirmation from IMF staff that the Agreement in Principle and the Local Option, taken together, are fully consistent with the parameters of Sri Lanka’s IMF-supported Program (having received informal confirmation from IMF staff of the compliance of the agreements during the negotiations with bondholders).

Additionally, Sri Lanka will continue to work with its OCC to secure confirmation of compliance of the agreements achieved with the bondholders with the CoT criteria. We expect both confirmations to be delivered in the coming days, following which Sri Lanka’s debt advisors will start working on all documentation necessary to formally launch the debt exchange, which is expected to happen within approximately 10 weeks.

6. How will the ISBs exchange be implemented?

The process of executing the ISB exchange requires Sri Lanka to prepare an exchange offer memorandum which will be made available to all holders of ISBs during a formal offer period, during which holders will consider the proposal in full and vote on its approval. Approval and execution of the restructuring requires certain voting thresholds set out in the terms of the ISBs to he met.

7. What are the next steps in Sri Lanka’s sovereign debt restructuring?

The next step is to begin the implementation work with the advisors to the bondholders, with the aim of completing the ISBs exchange in Q4 2024. Additionally, the Sri Lankan Authorities will continue discussions with China Development Bank (with which agreement in principle was also reached on September 19th 2024 after months long discussions) to draft and finalize the restructuring agreements as early as possible.

Sri Lanka will also pursue discussions with its remaining official creditors and other commercial creditors (holding approximately USD 0.9bn in total claims as of end 2023) to finalize negotiations and achieve restructuring agreements.

These next steps, which the Sri Lanka aims to expedite promptly enabling to finalize the restructuring of its external debt and advance its economic reform agenda to build a stronger economy.

Bonds & Forex

Sri Lanka rupee closes at 332.53/59 to US dollar spot, bond yields edge up

Monday November 9, 2026 5:05 pm

ECONOMYNEXT – Sri Lanka’s rupee closed at 332.53/59 to the US dollar spot on Monday, from 332.55/60 the previous day, while bond yields closed higher, dealers said.

A bond maturing on 15.09.2029 closed at 190/98 percent, up from 10.85/95 percent.

A bond maturing on 01.08.2030 closed at 11.07/12 percent, up from 11.05/10 percent.

A bond maturing on 01.02.2031 closed at 11.30/40 percent, up from 11.10/15 percent.

A bond maturing on 15.12.2032 closed at 11.65/70 percent, up from 11.55/65 percent.

A bond maturing on 01.11.2033 closed at 11.95/12.00 percent, up from 11.90/95 percent.

A bond maturing on 15.10.2034 closed at 12.10/15 percent, up from 12.05/12 percent.

A bond maturing on 15.08.2036 closed at 12.40/50 percent, up from 12.30/40 percent. (Colombo/Nov9/2026)

Markets

Sri Lanka stocks close up 1.37-pct, banks lead turnover

Monday November 9, 2026 3:29 pm

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed up on Monday, CSE data showed, with the benchmark All Share Price Index moving up 1.37 percent.

The ASPI was up 291.72 points at 21,531.37, while the more liquid S&P SL20 was up 1.67 percent, or 100.96 points, at 6,146.34.

Positive contributors to the ASPI were Commercial Bank of Ceylon (up 2.86 percent at 216.00 rupees), Hatton National Bank (up 1.52 percent at 399.75 rupees), Asiri Hospital Holdings (up 12.86 percent at 31.60 rupees), Tokyo Cement Company (up 5.22 percent at 84.70 rupees), and Access Engineering (up 3.93 percent at 81.90 rupees).

Carson Cumberbatch (down 4.24 percent at 712.00 rupees), Richard Pieris and Company (down 2.43 percent at 28.10 rupees), LOLC Holdings (down 0.62 percent at 400.00 rupees), Renuka Holdings (down 2.63 percent at 37.00 rupees), and Chevron Lubricants Lanka (down 0.61 percent at 204.25 rupees) were top negative contributors.

Market turnover was 3.33 billion rupees. The S&P/CSE Banks Industry Group led turnover with 667.76 million rupees.

The session saw heavy crossings, according to Raynal Wickremeratne, Head of Research and Strategy at NDB Securities. Significant crossings included Keells (23 million rupees), Distilleries Company (27.7 million rupees), Sunshine Holdings (30.6 million rupees), Commercial Bank (32.4 million rupees), Ceylon Tobacco Company (35.6 million rupees), Hatton National Bank (39.5 million rupees), Prime Lands (40.5 million rupees), and HAS Holdings (41.5 million rupees).

In corporate news, Hayleys Retail Holdings Ltd announced it has partnered with supply chain software provider Blue Yonder to build and scale an AI-native grocery supermarket chain across Sri Lanka. (Colombo/Nov09/2026)

Information Technology

Sri Lanka’s Hayleys Retail to launch supermarket chain with Blue Yonder

Monday November 9, 2026 3:12 pm

ECONOMYNEXT — Hayleys Retail Holdings Ltd has selected supply chain software provider Blue Yonder to build its grocery retail operations from the ground up, the two companies said in a joint statement.

Hayleys Retail, a member of Sri Lanka’s diversified conglomerate Hayleys Group, plans to open several stores in the near future to serve consumers across the country. The agreement marks Blue Yonder’s first retail customer in Sri Lanka.

“Our entry into supermarket retail is about bringing that same commitment to quality and reliability closer to everyday Sri Lankan consumers,” Mohan Pandithage, Chairman and Chief Executive of Hayleys PLC said.

“With Blue Yonder, our teams will have AI-driven insight to deliver a seamless, consistent shopping experience across every store,” he said.

Hayleys, which accounts for approximately 5 percent of Sri Lanka’s export income and operates across 17 business sectors, is entering the large-scale supermarket space by drawing on its group strengths in manufacturing, logistics, and services.

The company selected Blue Yonder to connect its data across merchandising and shelf space, deploy artificial intelligence agents to catch operational issues early, and scale its business into a national network without changing platforms.

The rollout will begin with merchandise operations to manage suppliers, items, costs, and pricing, followed by machine learning capabilities to forecast demand and balance store inventory during seasonal peaks.

“Hayleys Retail is choosing one where AI is the foundation rather than an add-on—connected data and agentic AI built into core merchandising operations, and planning that learns as the business grows,” Antonio Boccalandro, President, APAC at Blue Yonder said.

The retailer plans to use the platform to automate routine store tasks and adjust inventory according to real-time sales and local market trends as its store footprint grows. (Colombo/Nov09/2026)

Stocks & Companies

Sri Lanka’s Citrus Leisure extends Lotus Tower management pact

Monday November 9, 2026 1:16 pm

ECONOMYNEXT – Sri Lanka listed hospitality firm Citrus Leisure said it has extended an agreement to manage consumer-facing and entertainment spaces at the Colombo Lotus Tower, which includes revolving restaurant Blue Orbit, until June next year.

The initial agreement signed between Citrus Leisure and Colombo Lotus Tower Management Company (Private) Limited (CLTMC) is due to expire on December 11.

“The Board of Directors of CLTMC at meeting held on 2nd November 2026 has resolved to extend the term of the Management Agreement and continue the existing Management Agreement until 30th June 2027, to which the company has given its concurrence,” the company said in a market filing.

Citrus Leisure Plc opened its revolving restaurant at the Lotus Tower in December 2023.

The company signed a 3-year agreement with CLTMC in May 2023 to provide services in the management of (l) the banquet hall 1 on the 25th floor, (2) the banquet hall 2 on the 26th floor, (3) the revolving restaurant on the 27th floor, (4) the 6 suites situated on the 28th floor and the kitchen in the basement floor of the Colombo Lotus Tower.

The 350-meter or 1,150-feet tower, the tallest in South Asia, was built at a cost 104.3 million US dollars with 80 percent of the money borrowed from Exim Bank of China.

Located in the commercial heart of Colombo, the tower has been called a symbolic landmark of Sri Lanka as well as a colossal white elephant and has been mired in controversy for years. (Colombo/Nov9/2026)

Markets

CIC Holdings Sept quarter net profit rises 20-pct to Rs1.7bn

Monday November 9, 2026 11:50 am

ECONOMYNEXT — Sri Lanka conglomerate CIC Holdings recorded a net profit of 1.66 billion rupees for the quarter ended September 30, rising 20.3 percent from 1.38 billion rupees in the same quarter last year, interim accounts showed.

The group posted basic earnings per share of 0.87 rupees for the September quarter, up from 0.73 rupees a year earlier.

Quarterly revenue grew 3.4 percent to 20.89 billion rupees from 20.20 billion rupees, supported by broad-based growth across industrial solutions, livestock, and healthcare segments, which counterbalanced relative demand moderation in agricultural inputs.

Cost of sales rose 5.3 percent to 15.20 billion rupees, outpacing revenue growth and causing gross profit to contract marginally by 1.2 percent to 5.68 billion rupees.

Results from operating activities dropped 7.3 percent to 2.66 billion rupees from 2.87 billion rupees, impacted by higher operating overheads.

Selling expenses expanded 6.8 percent to 2.15 billion rupees, and general and administrative expenses climbed 5.8 percent to 1.07 billion rupees, while other operating income dropped 29.6 percent to 117.40 million rupees.

However, operating profits were cushioned by an impairment reversal on trade receivables of 85.83 million rupees, turning around from an impairment provision of 23.38 million rupees in the corresponding quarter last year.

Net finance costs climbed 35.4 percent to 712.25 million rupees from 526.01 million rupees.

The increase was driven by a 30.8 percent rise in finance expenses to 771.46 million rupees, primarily reflecting higher interest expenses on loans to finance elevated working capital and inventory requirements.

The quarter’s bottom line was strongly bolstered by CIC’s equity-accounted investment in John Keells Holdings PLC (JKH).

Share of profit from equity-accounted investees surged more than fourfold to 590.50 million rupees from 257.87 million rupees, driven by JKH’s strong profit expansion during the period.

The group also recognized a gain on bargain purchase of 55.59 million rupees during the quarter resulting from additional share purchases in JKH where the proportionate net asset value exceeded acquisition cost, compared to no such gain a year earlier.

With associate income gains offsetting operating margin contraction and higher borrowing costs, group pre-tax profit held virtually flat at 2.59 billion rupees, down 0.11 percent.

Income tax expense fell 29.4 percent to 606.24 million rupees from 858.71 million rupees, driving total group profit for the period up 14.1 percent to 1.98 billion rupees.

Total group assets stood at 108.58 billion rupees as of September 30, up from 99.75 billion rupees at the end of March 2026.

Group net asset value per share increased to 25.52 rupees from 22.10 rupees a year earlier.

CIC Holdings’ ordinary voting shares closed at 27.80 rupees at the end of September.(Colombo/Nov09/2026)

Markets

Sri Lanka stocks trend up; ASPI gains 0.78-pct

Monday November 9, 2026 10:40 am

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange was trading higher on Monday, CSE data showed, with the benchmark All Share Price Index moving up 0.78 percent.

The ASPI was up 165.73 points at 21,405.38, while the more liquid S&P SL20 was up 0.61 percent, or 37.04 points, at 6,082.42.

Positive contributors to the ASPI were Commercial Bank (up 1.55 percent at 213.25 rupees), Ceylon Cold Stores (up 2.61 percent at 128.00 rupees), Asiri Hospital Holdings (up 10.00 percent at 30.80 rupees), Hemas Holdings (up 1.27 percent at 32.00 rupees), and Ambeon Holdings (up 6.02 percent at 37.00 rupees).

Namunukula Plantations (down 3.92 percent at 63.70 rupees), LOLC Holdings (down 0.62 percent at 400.00 rupees), and Chevron Lubricants Lanka (down 0.12 percent at 205.25 rupees) were top negative contributors.

Market turnover was 428.31 million rupees. Capital goods led turnover with 82.53 million rupees. (Colombo/Nov09/2026)