š Walk the Talk: SriLankan Airlines
Acrostics Asia was three months ahead of the flag carrierās truce with its offshore bondholders.
Three months before SriLankan Airlines struck an in-principle agreement with its offshore bondholders, Acrostics Asia flagged that the noteholders had limited negotiating leverage because of a clause in the South Asian nationās debt restructuring.
The proof is in the file.
Key Timeline
SriLankan Airlines (SLA) told bondholders that it had appointed Lazard and Norton Rose Fulbright as its international financial and legal advisers, respectively.
Acrostics Asia wrote on 7 June that Sri Lanka was pushing the throttle to restructure the legacy debt of its flag airline after dropping a privatization plan.
Acrostics Asia wrote that SLAās bondholders were sabre-rattling by threatening to wind up the flag carrier, but a local court simply blocked them.
SLA and a group of bondholders terminated their first round of talks because their proposals were too far apart.
Acrostics Asia flagged that the bondholders risked overplaying their hand by pushing for a full recovery, as a clause in Sri Lankaās restructuring gave the nation a justification not to give special treatment to any group of creditors.
S&P upgraded Sri Lanka as the sovereign debt workout was unlikely to be derailed by a holdout group of its flag carrierās bondholders.
Acrostics Asia wrote that if the bondholders were banking on nuisance value, they had to prepare for a slog that may yield far less than what was on the table.
Sri Lankan President Anura Kumara Dissanayake said in his budget speech that SLAās offshore bond was expected to be restructured by year-end.
He also noted that Sri Lankaās earlier attempt to sell SLA did not generate enough interest from buyers.
SLA said it had struck an in-principle agreement for a bond restructuring that would include a 15% haircut along with a cash settlement and an exchange with sovereign notes.
Acrostics Asia wrote that these terms were likely the best outcome for the bondholders given their limited negotiating leverage.
SLA rolled out a consent solicitation, exchange and tender offer for its USD 175 million guaranteed notes due 2024.
A government official said Colombo had decided to retain control of SLA.
Acrostics Asia wrote that SLA is flying along a different trajectory from Pakistanās flag carrier that went on the privatization route.
However, SLAās targeted recovery will likely be hampered by its struggle to renew its fleet amid an industry-wide aircraft shortage.
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