Global investors and Sri Lanka officials set for second round of Bond Restructuring talks

According to sources familiar with the matter, Bloomberg reports that global investors and officials from Sri Lanka are expected to convene for a second round of discussions with the aim of restructuring $12 billion in defaulted global bonds later this month.

Following an initial round of negotiations in Europe at the end of March, a steering committee of bondholders and government representatives did not reach an agreement.

These parties intend to resume talks during the International Monetary Fund’s spring meetings in Washington DC, commencing on April 15.

The individuals, who preferred anonymity as the discussions are confidential, revealed that they have not disclosed specifics regarding the proposal being considered.

Requests for comments from the central bank, treasury secretary, and bondholder committee went unanswered as of Friday.

The restructuring of $27 billion in foreign debt, encompassing bonds and loans, is pivotal for Sri Lanka, with a deal with private investors being one of the final steps.

This restructuring is vital to maintain funding from the IMF bailout. Notably, agreements have already been reached with official creditors such as China, India, and the Paris Club, as well as with holders of domestic debt.

Indicative pricing compiled by Bloomberg indicates that dollar bonds maturing in 2030, which are among the most actively traded, have appreciated by about 9 cents this year, currently trading around 59 cents on the dollar.

Sources disclosed that discussions between government officials and global bondholders have included considerations for issuing macro-linked bonds as part of the restructuring.

These securities, which tie bond payouts to Sri Lanka’s gross domestic product performance, were reportedly broached during the initial round of negotiations.

In parallel, advisers representing bondholders, led by Rothschild & Co., are engaging with members of the Paris Club to present their proposals.

This initiative aims to prevent any eleventh-hour objections from official creditors, a scenario that has hindered other recent restructuring efforts, including in Zambia, according to the sources.