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Sri Lanka Considering Issuing Macro Linked Bonds as Part of Restructuring
October 13, 2023
As per the update published on Wednesday, it was reported that Sri Lanka had reached a debt restructuring agreement with China EXIM Bank. Sri Lanka is now considering issuing Macro Linked Bonds (MLBs) in which the payments depend on target conditions being missed or achieved. With MLBs, Sri Lanka would receive upfront debt relief if it fails to meet the targets under the IMF’s debt sustainability analysis, when such programs are reviewed. This is in contrast to typical sovereign restructuring debt deals done by several countries like Argentina, Greece, etc. where a pay out is made only on outperformance. According to sources, these instruments should help speed up the restructuring process and that other countries like Ghana are also considering including MLBs in their restructuring.
Sri Lanka’s dollar bonds were trading slightly positive, at distressed levels of about 46-49 cents on the dollar.
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