Author: TELO Admin

SriLankan Airlines has in theory defaulted on its $ 175 million international bond following its failure to complete the creditor consent solicitation process to obtain approval to defer coupon payments by 12 months before 25 January.

SriLankan was required to make the coupon payment for its $ 175 million Government-guaranteed bond due in 2024 by 25 December 2022. However, in early December 2022 it commenced a consent solicitation process to obtain bondholder approval for a deferment of the coupon payments and a waiver of ongoing events of default for a 12-month period.

It was reported that SriLankan Airlines had initially hoped to complete the consent solicitation process by 16 January before the end of the 30-day grace period to make its coupon payments expiring on 25 January.

However, speaking to The Sunday Morning Business, a senior official from the Ministry of Finance confirmed that SriLankan Airlines had to date failed to complete its consent solicitation process and that negotiations were still ongoing. He further revealed that no coupon payment had yet been paid to the bondholders.

“SriLankan Airlines has not paid the coupon payment yet and it is also yet to obtain a final decision (from the creditor consultation process). This is how things stand as of now. I believe it has not made the coupon payment because negotiations are still ongoing,” he explained.

In its announcement on 22 December 2022, SriLankan Airlines sought the consent of its bondholders over three proposals. Firstly, SriLankan asked for approval to defer two coupon payments due on 25 December 2022 and 25 June 2023 to be paid in full on 25 December 2023.

Secondly, investors were requested to approve a temporary 12-month waiver of events of default under a second proposal. Thirdly, bondholders were requested to allow a revision in the bond agreement to allow investors holding not less than 50% of the total principal bond amount to instruct the bond trustee to rescind and annul any notice given to the issuer to accelerate the bonds following an event of default.

All attempts by The Sunday Morning Business to contact SriLankan Airlines Chairman Ashok Pathirage and Minister of Ports, Shipping, and Aviation Nimal Siripala de Silva regarding the creditor consultation process proved futile.

While in theory SriLankan has clearly defaulted on its $ 175 million Government-guaranteed bond due in 2024 (ISIN iXS2010609662) with an annual coupon payment of 7% payable semi-annually, it is still possible that the airline may be able to avoid defaulting officially if the creditor consultation process is successful and the bondholders agree to waive the event of default for a 12-month period.

Speaking to The Sunday Morning Business previously, Manjuka Fernandopulle, an Attorney-at-Law specialising in sovereign debt restructuring and complex capital market transactions, stated that the decision of the airline bondholders with regard to the proposals forwarded by SriLankan Airlines would be based on whether they believed that SriLankan would be able to pay the amount due to them by December 2023 following the deferral of coupon payments or if they believed they would be better served by joining the creditor group consisting of the Government’s ISB holders in order to restructure the airline bonds together with the other bonds of the Sri Lankan Government in the ongoing debt restructuring process.

“The question before the airline’s bondholders is whether they are better off varying the terms of the bond and deferring the coupon payments or whether they are better off joining the creditor group of the Government’s ISB holders. Their decision will be based on the assurances provided by SriLankan Airlines regarding its ability to make the payments following the deferral. If they feel that they will get nothing from SriLankan even after the deferral, they will consider entering the creditor group consisting of the Government’s ISB holders and receive a restructured bond issued by the Government of Sri Lanka,” he explained.

Sri Lankan President Ranil Wickremesinghe has informed the All Party Leaders’ Conference on Reconciliation that the Cabinet was agreeable to fully implementing 13th Amendment, until the Party Leaders decide whether or not to abolish the Amendment.

This was reported by the President’s Media Division on Friday (27).

President Ranil Wickremesinghe had said that he is bound to implement the existing law in accordance with the executive powers of the President.

He had said further that the 13th Amendment to the Constitution is being implemented accordingly or the Parliament should abolish the 13th amendment.

The President Wickremesinghe also pointed out that any parliamentarian could move a private member’s bill to abolish the 13th Amendment to the constitution and the same amendment would have to be implemented provided that the bill was voted against by the majority of the House.

The President stressed that he was not ready to divide the country.

President Wickremesinghe made these remarks at the All-Party Conference, which was held at the President’s Office on Thursday (26) evening.

The statement made by the President is as follows:

It is my responsibility as the Executive to carry out the current law. For approximately 37 years, the 13th Amendment has been a part of the constitution. I must implement or someone has to abolish it by way of a 22nd amendment to the constitution by moving a private member’s bill. If the bill was voted against by the majority in the House, then the 13th amendment would have to be implemented.

“We can’t remain in a middle position saying that either we don’t implement the 13th amendment or abolish it,” President Ranil Wickremesinghe said.

I’m acting in accordance with the decision delivered by the Supreme Court Bench regarding the 13th Amendment, in particular, Chief Justice Palinda Ranasinghe’s ruling. If we stick to that, we might say that we are in a ‘united’ state. I oppose a federal state but devolution of power. The provincial Councils in Sri Lanka have no at least the powers that are vested in the London City Council. Hence we can’t define this as a federal state.

The late President J. R. Jayawardena introduced many clauses along with the attorneys-at-law not to make Sri Lanka a federal State. So far, every President has decided to put this into action. So either we ought to get rid of the 13th amendment or should implement it.

A massive extension of land was under the government by the time the conflict came to an end in 2009 and thereafter most of those lands were released to the public under the reigns of former Presidents Mahinda Rajapaksa and Mithripala Sirisena. The largest extension of lands in Jaffna was issued under the reign of former President Mithripala Sirisena. There is only a land extension of 3000 acres under the government as of now.

The release of that extension land too should be entrusted with the security forces to be done without causing interruption to the security activities. We discuss the release of those lands with the Defence Secretary, the Chief of Defence Staff, and the Commanders of Tri Forces and acted upon their views.

The Land Commission needs to be established immediately. The draft bill in that regard could be moved by March. The Constitution has it that nine representatives from each province should be included while 12 are appointed by the President. Then a national land policy should be formulated. Thereafter the National Land Policy could be put into action by the Land Commission.

Thirty per cent (30%) or more of the country is covered in forest. Here the lands have been allocated suddenly for forests in an unorganized manner. However, we have deforested up-country as well as the areas where the Mahaweli, Kelani and Kalu rivers commence. Somehow, the forest cover should be increased. We should allow the Land Commission to decide on the extension of land required to enhance the forest cover in accordance with the government’s policy up to 30%. I am dedicated in that endeavour too.

If establishment of the National Police Commission instead of a Provincial Police Commission is objected, an amendment should be made. However either should be done.

The measures that would be taken in this regard would be presented to the Parliament on February 08. And if there are any suggestions, they could be made so before February 04th that they may be considered and submitted on February 8th.

Neither any of here nor I am ready to divide our country. We are all Sinhalese who are seating here. These individuals will not betray the Sinhalese. If there are Sinhalese, they should coexist with other ethnic groups such as Tamils, Muslims, and Burghers. I have no doubt that if we protect the notion in the line ‘Children of one mother’ in our national anthem, we could go forward united.

We shall work toward a consensus-based solution for the political and economic issues one step at a time. Let’s solve our political and economic issues step by step in a manner that could be accepted by all.

Let’s act as we agreed earlier without being stuck in this problem. We neither betray any nor divide the country and the country is united today.

Source: PMD