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Cabraal denies Rothschild, Lazard restructuring discussions

25 Feb 2022

  • The Wall Street Journal reports SL in discussion with debt restructuring advisors 
  • Report claims potential proposals to raise cash discussed
  • Cabraal says SL did not seek any assistance from any bankers
    BY Shenal Fernando The Central Bank of Sri Lanka (CBSL) yesterday (24) provided clarification on the reports circulated by foreign media agencies that the Government of Sri Lanka (GoSL) had commenced talks with debt restructuring advisors from Rothschild & Co. and Lazard Ltd. and stated that the GoSL did not seek assistance from any bankers or financial advisors in the restructuring of its debt and that any discussions carried out were only limited to offers of new financing. This clarification was provided by CBSL Governor Ajith Nivard Cabraal on his official Twitter handle, where he stated: “A recent media story seems to claim Sri Lankan officials met some ‘restructuring’ bankers to resolve its ‘crisis’. Sri Lanka has not sought any ‘restructuring’ assistance of its debt and talks with financiers and/or bankers have been only to discuss offers of new financing.” The media report in question was published in The Wall Street Journal and claimed that the GoSL had carried out discussions with bankers from Rothschild & Co. and Lazard Ltd. regarding plans to address the debt and foreign exchange crisis of the country. According to The Wall Street Journal, such discussions included potential proposals to help the country raise cash, which includes sale of assets and securitisation of debt facilities.   Sri Lanka’s foreign currency-denominated debt has been identified by economists, government critics, and foreign rating agencies as unsustainable.  Upon downgrading Sri Lanka’s long-term foreign currency Issuer Default Rating (IDR) to “CC” from “CCC” Fitch Ratings stated: “We believe it will be difficult for the Government to meet its external debt obligations in 2022 and 2023 in the absence of new external financing sources. Obligations include two international sovereign bonds of $ 500 million due in January 2022 and $ 1 billion due in July 2022. The Government also faces foreign currency debt service payments, including principal and interest, of $ 6.9 billion in 2022, equivalent to nearly 430% of official gross international reserves as of November 2021. Cumulative foreign currency debt service, including interest and principal, amounts to about $ 26 billion from 2022 through to 2026.” The economic situation in the country is further exacerbated by the country facing a crippling foreign exchange liquidity crisis due to the collapse of its tourism industry in the face of the Covid-19 pandemic. Moreover, the country’s dwindling foreign worker remittances, as foreign workers have found unofficial remittance channels to be more attractive as a result of the CBSL’s insistence of fixing the exchange rate at Rs. 203 despite the kerb market offering a premium of over Rs. 40-60, have also contributed to the worsened economic situation.    


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