Bondholders raise transparency issues over SL’s debt deal with official creditors

• Say it is regrettable that there remains such a significant lack of transparency on part of official sector creditors
• Assert transparency between creditors is critical for private sector to reach an agreement compliant with parameters of SL’s IMF programme’s first review
• However, say they welcome progress on restructuring of official claims
• Point out no substantive engagement has taken place between Sri Lanka and its private creditors to date

Sri Lanka’s bondholders yesterday expressed concerns about the poor transparency on the debt restructuring agreement reached between the government and creditors and stressed the need for engagement.

The bondholders, who have come under the banner ‘Ad Hoc Group of Bondholders’, said it is “regrettable” that there remains such a significant lack of transparency on the part of official sector creditors, despite the Group’s efforts so far to act as a constructive counterparty.

The Group asserted that the terms of the agreement with the Official Creditor Committee  (OCC) and China Exim Bank have not been shared.

“Transparency between creditors is critical for the private sector to reach an agreement compliant with the parameters of Sri Lanka’s IMF programme’s first review and one that provides fair and equitable debt treatment,” the Group said in a statement to the media.

However, the bondholders said that they welcome the progress on the restructuring of official claims, as uncertainty around the treatment of these claims has hindered Sri Lanka’s recovery.

On Wednesday (29), the Finance Ministry and OCC announced that an ‘agreement in principle’ has been reached. The agreement would cover US $ 5.9 billion of government debt and consists of a mix of long-term maturing extensions and reductions in interest rates, the Finance Ministry said.

The Group reiterated that it has expressed support for Sri Lanka’s efforts since February 2023 and has been forthcoming and transparent with the official stakeholders at every stage of the process. 

While highlighting repeated efforts have been made to engage with the Sri Lankan authorities and its advisors in good faith, it said that unfortunately, no substantive engagement has taken place between Sri Lanka and its private creditors to date.

“The Group remains committed to reaching an agreement with the Sri Lankan authorities as quickly as possible to find a sustainable solution to Sri Lanka’s debt challenges, as they relate to the international bond debt,” it said.

The Group is advised by Rothschild & Co and White & Case LLP as financial and legal advisors. It represents creditors holding about US $ 12 billion of Sri Lanka’s outstanding bonds.