SriLankan Airlines (UL, Colombo International) will again default on a bond repayment, telling investors on January 16 that it would not pay the amounts that were due on December 25, 2023. The airline also skipped repayments due on the same bond issue in December 2022 and June 2023.
"Following the occurrence of events of default each pursuant to Condition 8(a)(i) of the 2024 Bonds as a result of the failure to pay the relevant coupon due on December 25, 2022, and June 25, 2023, respectively, the company confirms that it does not intend to pay the coupon due on December 25, 2023," the filing reads, adding that "a further event of default" would therefore occur.
Affected investors are holding onto USD175 million worth of bonds paying 7.0% per annum and guaranteed by the Sri Lankan government. The bonds mature on June 25, 2024.
The government is attempting to sell the state-owned airline but has twice extended the deadline to select pre-qualified bidders, mostly recently earlier this month when the Finance Ministry overseeing the privatisation process set a new date of February 5.
Meanwhile, SriLankan Airlines chairman Ashok Pathirage warns that the carrier faces a severe capacity squeeze in the next 12 months if it cannot proceed with its plans to lease aircraft to replace the six or seven due back to the lessors. The RFP to acquire the replacement aircraft remains on pause after parliamentary hearings and an adverse public reaction to the plan.
SriLankan Airlines says it will communicate further with the holders of the 2024 bonds in due course.
