Srilankan Airlines has warned about its capability to make a coupon payment on a Singapore-listed bond, citing the deterioration in Sri Lanka’s economy.
The payment relates to a $175 million bond with a 7% coupon listed in Singapore, according to a filing with the Singapore stock exchange. The bonds term is to complete in 2024.
The carrier missed a coupon payment due on 25 June, but still has a 30-day grace period. The bonds are backed by the Srilankan government, which holds 99.52% of the carrier.
“The economic situation in Sri Lanka has directly impacted the ongoing operations of the Company,” says Srilankan.
“In light of the current circumstances, the board considers it necessary to make use of the 30-day grace period to further determine the position of the company, both in respect of the upcoming coupon payment and its debt obligations more generally.”
The carrier adds that Sri Lanka’s economic conditions have deteriorated rapidly owing to a “very low level” of foreign exchange reserves, the coronavirus pandemic, and Russia’s invasion of Ukraine. As such, Sri Lanka is “seeking urgent financial assistance from the International Monetary Fund.”
“The board intends to establish a transparent process for discussions and communications with all bondholders, and to pursue an active dialogue with bondholders as soon as it is in a position to do so,” says Srilankan.
“The board will continue to keep bondholders informed as matters develop.”
In May, ratings agency Fitch affirmed its ratings for Srilankan bonds at ‘C’. It noted that Sri Lanka’s government has imposed a debt repayment moratorium, thus triggering “the commencement of a default-like process for [Srilankan].”
Cirium fleets data indicates that Srilankan has 22 in-service aircraft, comprising 11 Airbus A330s and 10 A320 family aircraft. All of its aircraft are leased. Lessors with exposure to the airline are AerCap, Air Lease Corporation, Aircastle, Avolon, Carlyle Aviation Partners, and one unconfirmed lessors.