A Sri Lankan government minister has said that state-owned carrier SriLankan Airlines (UL, Colombo International) will be able to pay less than half its total debts once ground handling and catering subsidiaries are sold off. His admission comes as the Sri Lankan government inches towards selling off its national airline.
Aviation minister Nimal Siripala De Silva told Sri Lanka's parliament on March 24 that the USD500 million expected to be raised from selling the subsidiaries would cover less than half SriLankan Airlines' USD1.2 billion of debts. "The rest of the debt will have to be borne by the Treasury," he said.
As reported by Sri Lanka's Daily Mirror outlet, the minister said the restructuring and sale of SriLankan Airlines was underway. Lazard, a multi-national financial advisory entity, has being retained to help prepare EOI documents regarding the sale of the airline and its subsidiaries. Other internationally-based advisors and banks are also expected to soon come on board.
A mid-March Sri Lankan government cabinet "approved in principle" decision listed SriLankan Airlines and its subsidiaries among a raft of state-owned entities up for sale. The sales, to be conducted via a competitive bidding process, will be managed by the Ministry of Finance's State-Owned Enterprise Restructuring Unit (SRU). The Sri Lankan government says the divestiture process will be "transparent and credible" and is reportedly looking to raise USD4.5 billion from the sale of the 17 state-owned entities. Sri Lankan media reports an India-based entity has expressed interest in SriLankan Airlines.
Earlier this month, a ch-aviation report on SriLankan Airlines said that the airline had failed to service loans obtained from local banks for up to five years. A breakdown of the airline's debts included USD210 million owed to those banks as of December 21, 2021; a further USD300 million owed to Sri Lanka's Bank of Ceylon and People’s Bank; and a combined USD325 million owed to Sri Lanka's fuel company and airport operator.
"We’re part of a national restructuring of state-owned enterprises," SriLankan Airlines CEO Richard Nuttall told Bloomberg TV last month. "There’s no equivalent of Chapter 11 in Sri Lanka at the moment, so that’s not an option. We have an airline that brings in, in round numbers, a billion dollars in revenue a year. We plan to make about USD100 million this year, but it’s all going into servicing past debts and has very little to do with running the airline today. If we can restructure the debt, we have a very rosy future."
Since then, the IMF has signed off on a USD2.9 billion loan to Sri Lanka designed to help stabilize its beleaguered economy and replenish depleted foreign exchange reserves. Sri Lanka Central Bank Governor P. Nandalal Weerasinghe told CNBC last weekend that the funds will help put the country on a path towards debt sustainability, build up its resources, and beef up foreign exchange reserves.
