SL bondholders takes about turn raising concerns over debt deal transparency
By: Staff Writer
Colombo (LNW): A group of creditors holding Sri Lanka’s international bonds welcomed the country’s debt restructuring agreement with official creditors, though it said a lack of transparency on deals struck so far was regrettable.
The same Ad Hoc Group of Bondholders (the “Group”) Lanka (“Sri Lanka”) has committed to working with the Sri Lankan authorities as quickly as possible to find a sustainable solution to Sri Lanka’s debt challenges as they relate to its international bond debt in October13.
To that end, the Group, acting through its Steering Committee has proactively submitted its own restructuring proposal relating to Sri Lanka’s outstanding international bonds.
The proposal, which provides upfront debt relief, includes a menu of new securities that would be offered to the holders of the existing bonds, including a “Macro-Linked Bond” (“MLB”).
How ever the recent complaint underscores rising worries that a lack of visibility for private creditors around debt deals between indebted countries and their official creditors could derail or delay those nations’ efforts to finalise restructuring.
Sri Lanka and a group of its creditor nations, including Japan, France and India, on Wednesday reached an agreement in principle on a debt rework of $5.9 billion of outstanding public debt.
That followed a deal between the country and the Export-Import Bank of China in October on about $4.2 billion of loans.
But the bondholder group, which represents creditors holding some of the country’s $12 billion of outstanding bonds, said this week lack of transparency between public and private creditors.
The noted that it was making it more difficult for them to strike a deal with Sri Lanka that was compliant with IMF rules and that provided “fair and equitable” debt treatment.
The group finds it 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 Ad Hoc Group of Bondholders said in an emailed statement.
Last week, objections from official creditors derailed an agreement in principle between Zambia and its bondholders to restructure the African nation’s international debt.
The group of Zambia’s bilateral creditors, including France, China and India, said the terms of that proposed deal were not comparable to the relief official creditors offered.
Zambia, as a low-income nation, is reworking its debt under the G-20-designed Common Framework, which makes its process slightly more rigid than Sri Lanka’s. But investors and experts said the issues around lack of information sharing was making it tough for all private lenders to craft debt reworks that public creditors deem comparable to their own offerings.
“It’s possibly more problematic than it was designed to be in terms of actually being able to achieve these debt renegotiations,” Robert Simpson of Pictet Asset Management said.