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Saturday October 1st, 2022

SriLankan Airlines bond rated at ‘C’ despite bond interest payment

ECONOMYNEXT – A bond of state-run SriLankan Airlines is still rated a ‘C’ despite the payment of the interest coupon by the carrier because the government has defaulted, Fitch Ratings said.

“The notes, which are due in 2024, remain in breach of two specific events of default tied to the guarantor – the government of Sri Lanka – as governed by the notes’ trust deed,” the rating agency said.

They are (i) the government’s 12 April 2022 announcement of a moratorium on the payment of principal and interest on its external debt, and (ii) the government’s default on the payment of interest on an external debt amount exceeding USD25 million in April 2022, and the expiry of the associated grace period in May 2022.”

The full statement is reproduced below:

 

SriLankan Airlines’ Interest Payment Does Not Affect Bond Rating

 

Thu 28 Jul, 2022 – 4:34 AM ET

 

Fitch Ratings-Singapore-28 July 2022: SriLankan Airlines Limited’s (SLA) payment of USD6.125 million interest on its government-guaranteed USD175 million unsecured notes within the 30-day grace period has no impact on the notes’ long-term rating of ‘C’, Fitch Ratings says.

The notes, which are due in 2024, remain in breach of two specific events of default tied to the guarantor – the government of Sri Lanka – as governed by the notes’ trust deed. They are (i) the government’s 12 April 2022 announcement of a moratorium on the payment of principal and interest on its external debt, and (ii) the government’s default on the payment of interest on an external debt amount exceeding USD25 million in April 2022, and the expiry of the associated grace period in May 2022.

In addition, the debt moratorium overhang affecting external debt of the government and that of public sector borrowers such as SLA is still in place, which Fitch views as a continuation of a default-like process for affected obligors.

These events are consistent with our definition for the long-term rating of ‘C’.

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