Thursday, April 25, 2024
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Govt. takes over Rs. 100 bn worth Sri Lankan Airlines debt sparing $ 175 mn bond

In the wake of no taker for the share divestiture and the restructuring of loss making Sri Lankan Airlines after postponing four times of the request for proposals till mid April , the government has taken over worth  Rs. 100 billion of SriLankan Airlines sparing the US $ 175 million five year international bond.

The SOE Restructuring Unit (SRU) said yesterday that the Cabinet of Ministers by its decision dated 4 March 2024 approved the transfer of liabilities of SriLankan Airlines to the Government of Sri Lanka (GoSL):

SriLankan Airlines should show operational and financial progress in the next six months, Minister of Aviation Nimal Siripala de Silva said.

He noted that progress should be shown as the Government has provided necessary assistance by absorbing the USD 510 million outstanding debt by the national carrier. 

SriLankan Airlines has faced severe criticism in the recent past due to the severe inconvenience caused to passengers as a result of operational issues.

However, based on a proposal by the President, as the Finance Minister, the government has allocated funds to cover US$ 510 million from the total US$ 1.2 billion debt that the airline owed to banks and other institutions, he said.

The national carriers liabilities included $ 105 million of Treasury guaranteed debt due to Bank of Ceylon, $ 12.9 billion of Treasury guaranteed debt due to Bank of Ceylon, $ 105 million of Treasury guaranteed debt due to People’s Bank.and Rs. 18.5 billion of Treasury guaranteed debt due to People’s Bank

These liabilities will be taken over by the treasury under the new financial arrangement .SRU said consequent to the move (worth Rs. 100 billion), the only component of significant term borrowing that remains in the books of SriLankan Airlines relates to a $ 175 million, 7%, five year international bond issued in 2019. 

This bond is also backed by a sovereign guarantee and is due for settlement in June 2024.“The Cabinet of Ministers has also decided that in the event of a ruling in favour of Sri Lankan Airlines with respect to the arbitration case filed by it against Airbus SE, steps will be taken to transfer proceeds arising from the same to the GoSL,” the SRU added. 

Last week Ports, Shipping and Aviation Minister Nimal Siripala de Silva the Government decided to take over $ 512 million of national carrier’s debt in a bid to make the national carrier more attractive to prospective investors. 

The Government last week announced that the deadline for Expressions of Interest for the national carrier was extended to 22 April. The previous deadline was 5 March.

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