Sri Lanka will pass legislation providing the framework for pension funds to submit their offers for a bond swap program, State Minister for Finance Shehan Semasinghe said in an interview.
(Bloomberg) — Sri Lanka will pass legislation providing the framework for pension funds to submit their offers for a bond swap program, State Minister for Finance Shehan Semasinghe said in an interview.
The deadline for pension funds to submit offers to switch defaulted Treasury bonds for new securities with longer maturities was extended for a second time to Aug. 28 earlier in the day.
Pension funds will have the choice of swapping defaulted bonds for new debt or face a tax of 30% compared to 14% as part of Sri Lanka’s domestic debt restructuring once the legislation is passed. Completing the domestic piece of its debt restructuring would give impetus to negotiations with the island nation’s external creditors, including bondholders as well as India, China and the Paris Club. Striking a deal is crucial for maintaining the flow of funds from an International Monetary Fund program that comes up for its first review in September.
“We are looking at meeting with creditors very soon, but the dates depend on how the Paris Club engages with other creditors,” said Semasinghe. “Sri Lanka will stick to transparency and equal treatment. No creditor has asked for special treatment.”
Sri Lanka’s 7.55% 2030 dollar bond was up 0.5 cents to 45.2 cents on the dollar, according to indicative pricing compiled by Bloomberg, the highest in over a month. The bonds have surged 15% since Sri Lanka unveiled its domestic debt restructuring plan around the end of June.
Foreign Minister Ali Sabry said private creditors have “almost agreed” to a 30% haircut in early July. The chief uncertainty once domestic debt restructuring gets completed will be when external creditors can come to an agreement. A case filed by bondholder Hamilton Reserve Bank Ltd. in a New York court demanding full repayment on its holdings is ongoing.
Semasinghe affirmed that Sri Lanka will complete its debt restructuring by September, adding that it will be done “without major concern” from the Hamilton Bank case.
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