Sri Lanka and the Bondholders Agreed on Debt Restructuring Terms, revealed a filing with the London Stock Exchange on Wednesday (3) night.

The Sri Lankan government announced restricted discussions took place with the Steering Committee of Bondholders regarding its International Sovereign Bonds (ISBs) from June 21 to July 2, 2024.

The discussions included legal and financial advisors Clifford Chance LLP, Lazard, White & Case, and Rothschild & Co.

The Steering Committee, comprising ten major bondholders representing 50% of the ISBs, held a working session in Paris on June 27-28.

They agreed on core financial terms for restructuring the ISBs, documented in a Joint Working Framework, which includes Governance-linked Bond features.

The framework needs confirmation from Sri Lanka's Official Creditor Committee and IMF staff for consistency with debt sustainability objectives.

According to the Joint Working Framework, a 28% haircut on the nominal amount of existing bonds is proposed.

FULL STATEMENT:

The Government of the Democratic Socialist Republic of Sri Lanka has announced that it has held restricted discussions between 21 June 2024 and 2 July 2024 (the "Restricted Period") with nine members of the steering committee who agreed to take part in the restricted discussions (the "Steering Committee") of the Ad Hoc Group of Bondholders (the "Group", and together with Sri Lanka, the "Parties") of its International Sovereign Bonds ("ISBs"). Sri Lanka was joined by its legal and financial advisors, Clifford Chance LLP and Lazard, respectively, and the restricted members of the Steering Committee were joined by the Group's legal and financial advisors, White & Case and Rothschild & Co, respectively. The Steering Committee as a whole comprises ten of the largest members of the Group, with the Group controlling approximately 50% of the aggregate outstanding amount of ISBs.

During the Restricted Period, Sri Lanka, the Steering Committee and its advisors met during a two-day working session in Paris on 27 and 28 June 2024 (the "Meetings"). At the conclusion of the Meetings, Sri Lanka is pleased to report that, following negotiations, the Parties agreed core financial terms of a restructuring of the ISBs, the terms of which are embodied in a joint working debt treatment framework (the "Joint Working Framework"), a copy of which is included in the Annex to this announcement (which is also available as a PDF version through the link at the bottom of this announcement). In addition, the Parties agreed to include Governance-linked Bond features in the terms of one or more series of the plain vanilla bond instruments that form part of the Joint Working Framework.

As the Joint Working  Framework includes a state-contingent feature, it remains to be confirmed by (i) the Secretariat of Sri Lanka's Official Creditor Committee (the "OCC") to ensure comparability of treatment with the terms agreed between Sri Lanka and the OCC ("Comparability of Treatment") and (ii) the IMF staff to ensure consistency with the parameters and debt sustainability objectives of Sri Lanka's IMF-supported Program. As such, following the Meetings, the advisors to Sri Lanka and the Steering Committee will consult with each of the Secretariat of the OCC, to confirm the consistency of the Joint Working Framework with the principle of Comparability of Treatment, and staff at the IMF, to confirm the consistency of the Joint Working Framework with the parameters and debt sustainability objectives of Sri Lanka's IMF-supported Program.

During the restricted discussions, Sri Lanka and the Steering Committee also progressed discussions on certain non-financial provisions.

Sri Lanka would like to thank the Steering Committee, the Group and their advisors for their close collaboration and valuable contribution in the Meetings, and looks forward to further constructive interaction to finalise the ISB restructuring.