SriLankan Airlines has missed a coupon payment due on June 25 on its US$175m 7% June 2024s.
“The economic situation in Sri Lanka has directly impacted the ongoing operations of the company,” it said in a statement on SGX.
“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 bonds are guaranteed by the Government of the Democratic Socialist Republic of Sri Lanka, which has a 99.52% stake in the carrier.
On April 12 the Ministry of Finance announced a moratorium on all its external debt and debt obligations amounting to a par value of US$12.5bn. With an acute shortage of foreign exchange reserves, the country has run out of funds to pay for essential fuel and food stocks. Government officials are in urgent talks with the International Monetary Fund over financial assistance from the institution.
SriLankan Airlines said certain events of default have occurred and are continuing as a result of two developments – the government’s moratorium on debt principal and interest payments that constitutes an event of default under the 2024 bond terms, and the default of over US$25m on the interest payment on the 2024s.
The company said it plans to begin discussions with all bondholders as soon as it is able to.
The 2024s were last seen at 48.125 Wednesday, according to Refinitiv data. SriLankan Airlines was downgraded by Fitch to C from CC on April 14.
Sri Lanka officially defaulted on April 18 when it missed coupons due on two US dollar bonds. It has hired financial and legal advisers Lazard and Clifford Chance to renegotiate with its creditors, including bilateral lenders from Japan, India and China.