SriLankan Airlines (UL, Colombo International) announced on July 26 that it had “taken the necessary steps” to settle the interest relating to its government-guaranteed USD175,000,000 bond due in June 2024.
The bond has a 7% annual coupon rate, and the interest owed to bondholders “was paid in full within the applicable grace period using company funds,” the cash-strapped carrier said in the brief statement.
The bond was issued in June 2019, and payments have been made semi-annually on June 25 and December 25 of each year with the Sri Lankan government as guarantor.
However, in a filing to the Singapore bourse several weeks ago, the majority state-owned carrier admitted it had missed this year’s June 25 payment, blaming the near bankrupt state of the island’s economy. It would use the ensuing 30-day grace period to reassess its position, it said, leading many to expect an imminent bond default.
The government had itself defaulted on payments for the first time when USD78 million of unpaid debt interest payments expired on May 18. Central Bank Governor Nandalal Weerasinghe warned that no foreign debts would be repaid until external loans are restructured. It was not immediately clear if the government under the new president, Ranil Wickremesinghe, who took office on July 21, had changed the general stance on sovereign debt repayment.
