SriLankan Airlines (UL, Colombo International) will hold an extraordinary bondholders' meeting in January to seek approval to defer two rounds of interest payments due on USD175 million worth of guaranteed bonds.
In a December 22, 2022, filing with the Singapore Stock Exchange (SGX), SriLankan gave notice of the January 20, 2023, meeting where it needs the support of 75% of voters to pass three extraordinary resolutions, namely;
-
The deferment of two interest payments due on December 25, 2022, and June 25, 2023, for twelve months, with interest payments falling due on December 25, 2023, together with interest accrued thereon at the contract rate of 7% per annum;
-
The continuation of a 12-month waiver from December 22, 2022, regarding default events, including the April 2022 Sri Lankan government general moratorium on the payment of debt principal and interest and other debt interest payments exceeding USD25 million; and
-
Amending conditions to allow a majority of bondholders to rescind and annul a notice given by the trustee to the issuer (SriLankan Airlines) to accelerate the bonds following a default occurring.
SriLankan Airlines applied for a 30-day grace period to meet its June 25, 2022, interest payment. Despite widespread expectation the airline would default, payment was made within the 30-days. The bonds were issued in 2019 with a June 2024 maturity date.
SriLankan Airlines is 99.52% owned by the government, and is one of many state-owned entities undergoing a financial and operational restructuring after a severe economic crisis in the country this year. In the SGX filing, the airline said this restructuring was taking some time to implement, which is why it is seeking the deferral of interest payments.
"The deferral of the deferred interest amounts and the temporary waiver of outstanding events of default are requested in order to provide the issuer and the guarantor (Sri Lankan government) time to develop a long-term strategy for the issuer," read the filing. "The addition of the ability of a majority of bondholders to rescind a determination to accelerate the bonds is intended to bring the conditions in line with market standard."