SL launches ISB exchange following cabinet approval

• Holders of existing bonds to tender their bonds in exchange for new instruments over a three-week period
• Final deadline set for 12 December 2024
• Govt. “strongly” encourages all holders to participate in the exchange process early
• President Dissanayake urges private sector creditors to participate in the debt restructuring process to provide essential relief

Sri Lanka yesterday reached a significant milestone in its debt restructuring agenda with the official launch of the exchange of its outstanding International Sovereign Bonds (ISBs), totalling approximately US$12.55 billion as of November 25, 2024.

The move follows the approval of the terms and conditions of the invitation by the new Cabinet of Ministers, which was formed on 18 November 2024.

The Ministry of Finance yesterday invited holders of the existing bonds to tender their bonds in exchange for new instruments over a three-week period, with a final deadline set for December 12, 2024.

In the announcement, the government “strongly” encouraged all holders to participate in the exchange process early, emphasising that the features of the new instruments were discussed in good faith over two years to ensure the best possible outcome for all parties.

“Today’s official announcement of the commencement of the International Sovereign Bond restructuring with private creditors marks an important milestone for Sri Lanka. We extend our gratitude to our external creditors, the IMF, and the Official Creditor Committee for the good faith negotiations that have enabled us to reach this point,” President and Minister of Finance, Planning and Economic Development Anura Kumara Dissanayake said in 
a statement.

“With the successful achievement of a Staff-Level Agreement on the third review of our IMF-supported programme on 22 November, I urge private sector creditors to participate in the debt restructuring process to provide essential relief, thereby laying the groundwork for a brighter future for Sri Lanka and its people,” he added.
The successful completion of the bond exchange is expected to enable Sri Lanka to achieve sovereign debt sustainability and accelerate economic recovery. 

Under the baseline scenario, the country is projected to reduce debt service payments by approximately US$9.5 billion over the four-year IMF programme period, cut the average coupon rate on bonds to 4.4 percent from 6.4 percent, and extend the average maturity profile by over five years.

An agreement in principle was reached on September 19, 2024, with two representative groups of bondholders—one comprising international investors and the other domestic financial institutions—together holding over 50 percent of the outstanding bonds.

Additionally, both the IMF and Sri Lanka’s Official Creditor Committee have confirmed that the proposed features of the new instruments align with the parameters of the IMF-supported programme and the Comparability of Treatment principle.