An Echelon Media Company
Tuesday December 5th, 2023

Sri Lanka opposition fires warning against value recovery instrument for private creditors

ECONOMYNEXT – Sri Lanka’s main opposition has warned against the government against giving foreign bond holders so-called state contingent restructuring debt instrument (SCDI) whose payout is linked to future economic performance.

Opposition legislator Harsha de Silva said domestic bonds were restructured due to pressure from foreign private creditors, according to what was told in parliament.

Sri Lanka bond-holders have proposed to exchange bonds which will start off with a higher value but whose principal and interest will reduce (a downside bond) if the economic growth is as low as 3.1 percent predicted in an International Monetary Fund debt sustainability analysis.

Sri Lanka has rejected the proposal for a down side bond (labelled) a ‘macro-linked bond’ but has said a value recovery instrument (upside security) could be discussed provided it is does not violate comparable treatment principles.

Value recovery instruments have now become a feature especially of private creditor as a means to tide over disputes about economic projections, leading to a faster conclusion of restructuring.

“Let it be known if anyone is to be over compensated, that group must be those that took the biggest beating in this whole restructuring exercise,” opposition legislator Harsha de Silva told parliament during a 2024 budget debate.

“And those are the workers whose EPF (Employment Provident Fund) was the hardest hit

“So we urge the authorities to bind any future administration into an unfair deal with ISB holders. The days of this government is numbered. Please be transparent in any deal you enter, so that we are all on the same page.”

De Silva said the 3,000 billion rupees was set aside to restructure bonds, which at about 9 billion US dollar indicating a 30 percent haircut.

“We are saying a 30 percent hair cut is not sufficient,” de Silva said. “If you link a macro-linked bond to it, that is a sweet deal that no one can even expect.”

De Silva said parliament was told that EPF bonds were re-structured due to pressure from foreign bondholders.

The macro-linked bond started off with a 20 percent hair cut with what is believed to be higher coupons that Sri Lanka may be willing to give, but hair cuts will if growth remains low.

State Minister for Finance Shehan Semasinghe said all deals will be comparable as promised to creditors by President Ranil Wickremesinghe in writing.

“External deb restructuring, discussions are taking place very positively,” Semasinghe said. “I also want to give another assurance to you.

“His Excellency the President gave an assurance to all creditor in writing, that when the external debt restructuring resolution is being finalized that our treatment will be comparable.

“That is the principle which we are negotiating on.”

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka finding ways to clear 1.1mn pending cases: Justice Minister

ECONOMYNEXT – Sri Lanka is taking a series of steps to speed up 1.1 million pending court cases and encourage alternative dispute solving mechanisms, Justice Minister Wijedasa Rajapakshe said.

“The delay in court cases is a serious problem,” Minister Rajapakshe told a briefing at the President’s Media Centre.

“We have already taken several steps to expedite cases.”

There were 5,680 cases in Supreme Court, 4,054 in the Court of Appeal, 6,168 in the High Court of Civil Appeal, 8,363 in the Commercial High Court, 28,000 in the High Court, 254,000 in District Courts and 791,000 in Magistrates Courts.

In 2015, only 49 percent of complaints to mediation boards were resolved. Following reforms, the ratio has been increased to 70 percent.

The value of disputes going to mediation board has been raised to one million rupees from 500,000 rupees.

To solve land problems in the post-war period, special mediation boards on property was set up in the North and the East.

Mediation boards on property will be set up in another 16 districts.

Commercial High Courts were increased to four from three.

Another Commercial High Court will be set up in the future. The consideration of cases that can go to a High Court was raised from 4 million rupees to 10 million rupees.

A commercial dispute resolution law will be introduced next January.

A small claims court has been established.

Case involving disputes below 2 million rupees can be directed to small claims court.

Continue Reading

Sri Lanka stocks close up as some investor interest returns

ECONOMYNEXT – The Colombo Stock Exchange closed up on Monday, CSE data showed.

The All Share Price Index was up 0.22 percent, or 23.33 points, at 10,743.59.

The S&P SL20 index was up 0.68 percent, or 20.60 points, at 3,067.73.

Turnover was at 708 million. The banks sector contributed 189 million, while the food, beverage and tobacco sector contributed 176 million of this.

Sri Lanka’s stock market has seen some investor interest return after last week’s news that the country had managed an agreement on a debt restructuring deal with an official creditor committee, and foreign funds for some development projects resumed.

Top positive contributors to the ASPI in the day were Sampath Bank Plc (up at 71.50), LOLC Holdings Plc (up at 379.00), and Commercial Bank of Ceylon Plc, (up at 90.90).

There was a net foreign outflow of 52 million.

Citrus Leisure Plc, which announced that its banquet hall and revolving restaurant at the Lotus Tower would launch on or around Dec 9, saw its share price rise to 6.20 rupees. (Colombo/Dec4/2023).

Continue Reading

Sri Lanka rupee closes broadly steady at 328.10/30 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 328.10/30 to the US dollar on Monday, from 328.00/10 on Friday, dealers said.

Bond yields were stable.

A bond maturing on 01.06.2025 closed at 13.70/14.00 percent from 13.70/95 percent.

A bond maturing on 01.08.2026 closed at 13.90/14.10 percent from 13.90/14.05 percent.

A bond maturing on 15.01.2027 closed at 14.00/14.10 percent from 14.05/10 percent.

A bond maturing on 01.07.2028 closed at 14.20/35 percent from 14.15/25 percent.

A bond maturing on 15.05.2030 closed at 14.25/45 percent, from 14.20/45 percent.

A bond maturing on 01.07.2032 closed at 14.05/40 percent, from 14.00/45 percent. (Colombo/Dec4/2023)

Continue Reading