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Sri Lanka’s government authorities are concerned about the debt restructuring proposal submitted by the bondholders last week. The authorities want to take more time to consider the proposal and assess its compatibility with parameters in Sri Lanka’s IMF-supported program. According to the statement released, the authorities have serious reservations about the construct of the macro linked bonds (MLBs) proposed by the investors. Further, Sri Lanka has invited bondholders to further engage with the nation’s debt advisers, while suggesting a value-recovery instrument (VRI), which would provide larger debt relief upfront and also provide higher payouts if the country outperforms stated targets by the IMF.
Sri Lanka’s dollar bonds were trading slightly lower by around 0.5 points albeit at distressed levels of about 49-51 cents on the dollar.
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