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More Details of Sri Lanka’s MLB Debt Restructuring Plan Emerge
October 16, 2023
In the latest update to Sri Lanka’s debt restructuring talks, a group of private holders are said to have proposed that the government issue 10 Macro Linked Bonds (MLBs) maturing between 2027 and 2036. Holders choosing the MLBs would take a haircut of 20% on the principal. It also notes that coupons would be paid as a mix of cash and kind, with cash coupons from 2028 paying between 8-9.5%, depending on the maturity. The coupon step-down as part of the MLB’s structure will be triggered if Sri Lanka’s GDP for 2026-2027 period is below $98.9bn, as per the IMF’s World Economic Outlook measured in 2028. Sri Lanka’s current GDP stands at about $75bn. The step-down will see the coupon rate fall by 250-600bp (2.5-6%), depending on the extent of the gap between the actual GDP and the target. However, there was no confirmation on the above details by the finance ministry or government.
Sri Lanka’s dollar bonds were trading slightly higher by over 0.5 points albeit at distressed levels of about 47-49 cents on the dollar.
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