COLOMBO - The Democratic Socialist Republic of Sri Lanka has announced the commencement of a consent solicitation and invitation to exchange concerning the nation's existing bonds. This financial maneuver is designed to address modifications to the terms of the bonds and is contingent on bondholder consent.
The invitation, which began on Monday, involves a mandatory exchange of the existing bonds for new securities or substitute consideration, depending on the bondholder's choice and eligibility. The process is detailed in the Invitation Memorandum dated November 25, 2024, accessible to bondholders upon confirmation of eligibility and registration.
The existing bonds subject to this invitation include multiple series with various maturity dates ranging from 2023 to 2030, with outstanding principal amounts totaling billions of U.S. dollars. Eligible bondholders have the option to exchange their bonds for new securities, which include Macro-Linked Bonds, Governance-Linked Bonds, USD Step-Up Bonds, and PDI (OTC:IDXG) Bonds, collectively known as New Eurobonds.
Additionally, bondholders may elect to receive Local LKR Bonds, which will be issued in Sri Lanka's local currency and are subject to a cap. The exchange consideration varies based on the series of existing bonds and the option selected by the bondholder.
The invitation also offers an exchange fee in the form of a zero-coupon Exchange Fee Bond, maturing on December 27, 2024. Furthermore, accrued consideration payments will be made to holders of the new securities on December 24, 2024.
The consent solicitation and exchange are subject to certain settlement conditions, including receiving the requisite consents and meeting a minimum participation condition of at least 90% of the aggregate principal amount of existing bonds. The Republic reserves the right to waive this condition if at least 80% participation is achieved.
The deadline for bondholders to participate in the exchange is set for December 12, 2024, with the settlement date expected on December 20, 2024. The process for participating involves submitting instructions through the appropriate channels, including DTC, Euroclear, or Clearstream, Luxembourg.
Bondholders who fail to participate by the expiration deadline may still be entitled to receive the applicable exchange consideration on subsequent distribution dates, but they will be allocated to the Global Bonds Option by default.
This financial restructuring move by Sri Lanka is critical for the country's efforts to manage its debt obligations. The invitation is based on a press release statement and is intended for qualified institutional buyers and non-U.S. persons in compliance with applicable securities laws.
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