Buy Sri Lanka Bonds after restructuring proposal says BofA

• Estimates 30% haircut and 12-14% exit yield

Bloomberg: Bank of America strategists raised their recommendation for Sri Lanka dollar bonds after the Government sent a new restructuring proposal to dollar bondholders. “We move Sri Lanka EXD to Overweight on the apparent progress with the long-awaited restructuring,” strategists led by Vladimir Osakovskiy wrote in note.

“We estimate fair value of country’s EXD at $ 51-$ 56 range in expected recovery value at 12-14% exit yield, which is based on our baseline assumptions of a 30% ‘haircut’ on principal, linear amortization from 2028 onwards and 50% reduction of coupon during IMF program, but also the likely separate treatment of past-due interest (PDI) similar to the earlier bondholder proposal.”

BofA recommended buying notes due in November 2025 with a target $ 57, stop loss $ 49.