Citi says Sri Lanka Bonds could gain even without deal by June

Monday, 20 May 2024 03:46 - - {{hitsCtrl.values.hits}}

Bloomberg: Sri Lanka’s dollar bonds have room to rise, even as doubt remains over whether the nation can strike a debt restructuring deal before its next review with the International Monetary Fund, according to Citi.

“We think bonds have upside from current level,” analysts at the bank led by Baqar Zaidi and Johanna Chua wrote in a note

“We assume that some counterproposal options would have already been discussed with the IMF, which could provide the IMF board some space to take a more lenient view of ‘adequate progress’ on debt restructuring.”

Deal likely to be reached before next presidential elections in September, but unclear whether it will happen before the next IMF review expected in June.

Citi expects final recovery value on bonds to be somewhere between the mid-50 cents on the dollar, based on the government’s proposal, and high 70s cents on the dollar from the bondholder offer.

“Sri Lanka’s proposal serves as a benchmark for market prices from here onwards, and the potential for upside in order to compromise with the bondholder negotiating group is substantial,” according to Citi.

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