Sri Lanka private creditors propose haircut, GDP-linked bonds

NEW YORK (Reuters) – A group of private holders of Sri Lanka’s eurobonds proposed in a debt overhaul plan to the government the issuance of 10 bonds linked with the country’s macroeconomic health that will mature between 2027 and 2036.

Holders choosing the macro-linked bonds would take a haircut of 20% on the principal, according to the proposal.

Reuters reported on Thursday Sri Lanka’s private creditors had sent a new proposal on how to restructure $12 billion of overseas debt.

The proposal suggests coupons as a mix of cash and payment in kind, with cash coupons from 2028 paying between 8% and 9.5%, depending on the maturity.

The Sri Lankan government did not respond to a request for comment late on Friday.

The step-down option will be triggered if Sri Lanka’s gross domestic product (GDP) current prices for the 2026-2027 period is below $98.9 billion, when measured in 2028 by the International Monetary Fund’s World Economic Outlook.

The most recent reading, for 2022, is $74.85 billion.

Should the step-down option kick in, the coupons will be reduced by between 2.5 percentage points and 6 percentage points, depending on the severity of the shortfall, the proposal suggested.

(Reporting by Rodrigo Campos; Editing by Lisa Shumaker and Emelia Sithole-Matarise)