Thursday Nov 14, 2024
Thursday Nov 14, 2024
Friday, 20 October 2023 02:29 - - {{hitsCtrl.values.hits}}
The Government yesterday said it is wary of the “Micro-Linked Bonds” proposed by Ad Hoc Group of Bondholders but left the window open for further negotiations for a more amicable arrangement.
In a statement, the Finance Ministry said the Government has taken good note of the Ad Hoc Group of Bondholders' (the Group") statement dated 13 October and accompanying debt restructuring proposal relating to Sri Lanka›s outstanding international bonds.
“The authorities of Sri Lanka wish to acknowledge the Group› s proposal, and further clarify
that this proposal has not received a favourable response from Sri Lanka,” the Finance Ministry said.
It said the authorities and their advisors intend to take the necessary time to consider the proposal and assess its compatibility with the parameters in Sri Lanka›s lMF-supported program and the comparability of treatment principle, compliance with both of which is an imperative for the authorities.
The authorities have already expressed to the bondholders› advisors their serious reservations about the construct of the Macro-Linked Bonds proposed by the Group.
The Finance Ministry said Sri Lanka invites the Group to further engage with the country›s debt advisors, under existing NDAs, to progress the matter in a reasonable and viable way. It is the authorities› belief that the indicative debt restructuring scenario shared with commercial creditors in May 2023 provided a robust basis for engagement.
“The authorities understand that the Group may have diverging views on the GDP and exchange rate trajectories projected as part of the lMF-supported program.
The authorities are therefore ready to discuss a potential value recovery instrument if structured appropriately, taking into account the position of other creditors.
The Finance Ministry response comes after Bloomberg reported that Bloomberg quoting Citi analysts said investors viewed the proposed Macro-Linked Bonds as extremely generous.”
Sri Lanka dollar bonds look attractive, and fair value for macro-linked could be in the high 50s to mid- 60-cents on the dollar if the proposal is accepted, Johanna Chua and Donato Guarino, strategists at Citi wrote in a note, said Bloomberg.
Sri Lanka’s 7.55% 2030 bond advanced to 47.4 cents on the dollar Monday, the highest since March last year, before the nation’s historic default, according to indicative data compiled by Bloomberg Macro-linked bonds are “a new instrument whose payouts are linked to the evolution of Sri Lanka USD nominal GDP. The goal of this floating cash-flows structure is to comply with the Debt Sustainability Analysis targets embedded in Sri Lanka’s IMF Program”
Citi estimates a lower probability that the smaller payout for macro-linked bonds — that would be triggered in a lower GDP growth scenario — will be triggered.
“While we think terms being proposed here are still subject to renegotiation by the government, the provision of this private creditor bondholder restructuring proposal, alongside news of a preliminary agreement with China Exim Bank on the treatment of $ 4.2 b of outstanding debt should eventually pave the way for an IMF Executive Board approval of the first program review, and $ 334 m in tranche disbursal by November,” Citi said.
