Sri Lanka’s first round of talks with dollar bondholders failed to yield an agreement, sending bonds lower, even as the South Asian country hopes to reach a deal in the next few weeks.
The nation’s 7.55% 2030 bond fell as much as 2.8 cents to 53.94 cents on the dollar, the biggest decline since 2022, according to data compiled by Bloomberg. Note due 2025, 2026, 2027, and 2028 also fell, making Sri Lanka the worst performer in emerging markets on the day.
“Sri Lanka reiterated its reservations regarding the structure of the macro-linked bonds,” the government said in an official statement on the first round of talks, referring to a bondholder proposed instrument whose payout would vary depending on the nation’s economic performance.
The failure to arrive at a deal puts pressure on Sri Lankan authorities who need to make progress on debt restructuring to keep funds flowing from the International Monetary Fund.
“Bondholders and Sri Lanka will need to review the areas of negotiations and resume talks,” said Avanti Save, credit strategist at Barclays Plc. “If the talks break down, then the risks are that the restructuring will be delayed” and create uncertainty about the potential outcomes.
‘Common ground’
Sri Lanka wants to reach “common ground in the next few weeks” ahead of the second review of the IMF program by the Executive Board, the government said. The South Asian nation had secured an initial approval for a $337 million payout from the IMF in March.
Staff from the Washington-based lender have yet to assess a revised proposal submitted by bondholders on April 3, the government said.
Bloomberg reported earlier in April that investors and Sri Lankan officials would hold another round of talks around the IMF’s spring meetings taking place in Washington DC this week.
(Bloomberg)
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