Fitch Ratings yesterday announced it has chosen to withdraw the rating of SriLankan Airlines for commercial reasons and therefore will no longer provide ratings or analytical coverage for the national carrier.

It also withdrew the rating on the US$ 175 million government guaranteed 7 percent unsecured bonds of SriLankan Airlines, due 25 June 2024, which was affirmed at ‘C’. 

The rating on the bonds was driven by the unconditional and irrevocable guarantee of the government of Sri Lanka (Long-Term Foreign-Currency Issuer Default Rating (IDR): RD). SriLankan Airlines did not pay the bonds’ principal and interest due 25 June 2024, and is currently within the 30-day grace period. The previous defaults of the airline on the bond’s coupon payments due 25 December 2023, 25 June 2023, and 25 December 2022 are continuing, with grace periods having expired.

Another event of default was triggered due to the 12 April 2022 announcement by the Sri Lankan government of a debt moratorium on several categories of sovereign and public-sector entities’ external debt, as well as the ensuing non-payment of interest on the government’s external debt.

SriLankan Airlines bonds are rated ‘C’, factoring in Fitch’s view of average- to below-average recovery prospects following a default, in line with the agency’s Corporates Recovery Ratings and Instrument Ratings Criteria, and Country-Specific Treatment of Recovery Ratings Criteria. 

“The bonds of issuers that are very close to default show little distinction between ‘RR4’ and’RR6’ recoveries. Therefore, Fitch has not assigned a Recovery Rating to the bond,” the rating agency said.

Earlier this month, the Ministry of Ports and Aviation affirmed there are no suitable investors for the debt-heavy national carrier. Since there was minimal global interest in the airline, the government is looking to restructure the airline instead of going ahead with the plan of selling it outright.