Sri Lanka and its creditors have reached agreement on the terms for a 12 billion US dollar bond restructuring, bringing the former closer to completing its debt overhaul two years after a soft default.The deal marks the culmination of more than a year of difficult negotiations between Sri Lanka and its bondholders and the deal will help restore access to international capital markets.

Investors agreed to take a 28% nominal reduction on the bonds as part of the framework, the two sides said in a statement. The ad-hoc bondholder group holds about 50% of the outstanding overseas bonds and includes Amundi Asset Management, BlackRock, Eaton Vance Management, Grantham, Mayo, Van Otterloo & Co., Morgan Stanley Investment Management and T. Rowe Price Associates, among others.

The creditors are represented by White & Case and Rothschild & Co., while Clifford Chance and Lazard Inc. represents the government.

Given below is a statement by the London Stock Exchange: “The Government of the Democratic Socialist Republic of Sri Lanka has announced that it has held restricted discussions between 21 June 2024 and 2 July 2024 (the “Restricted Period”) with nine members of the steering committee who agreed to take part in the restricted discussions (the “Steering Committee”) of the Ad Hoc Group of Bondholders (the “Group”, and together with Sri Lanka, the “Parties”) of its International Sovereign Bonds (“ISBs”).

Sri Lanka was joined by its legal and financial advisors, Clifford Chance LLP and Lazard, respectively, and the restricted members of the Steering Committee were joined by the Group’s legal and financial advisors, White & Case and Rothschild & Co, respectively. The Steering Committee as a whole comprises ten of the largest members of the Group, with the Group controlling approximately 50% of the aggregate outstanding amount of ISBs.

“During the Restricted Period, Sri Lanka, the Steering Committee and its advisors met during a two-day working session in Paris on 27 and 28 June 2024 (the “Meetings”). At the conclusion of the Meetings, Sri Lanka is pleased to report that, following negotiations, the Parties agreed core financial terms of a restructuring of the ISBs, the terms of which are embodied in a joint working debt treatment framework (the “Joint Working Framework”), a copy of which is included in the Annex to this announcement (which is also available as a PDF version through the link at the bottom of this announcement). In addition, the Parties agreed to include Governance-linked Bond features in the terms of one or more series of the plain vanilla bond instruments that form part of the Joint Working Framework.

“As the Joint Working Framework includes a state-contingent feature, it remains to be confirmed by (i) the Secretariat of Sri Lanka’s Official Creditor Committee (the “OCC”) to ensure comparability of treatment with the terms agreed between Sri Lanka and the OCC (“Comparability of Treatment”) and (ii) the IMF staff to ensure consistency with the parameters and debt sustainability objectives of Sri Lanka’s IMF-supported Program. As such, following the Meetings, the advisors to Sri Lanka and the Steering Committee will consult with each of the Secretariat of the OCC, to confirm the consistency of the Joint Working Framework with the principle of Comparability of Treatment, and staff at the IMF, to confirm the consistency of the Joint Working Framework with the parameters and debt sustainability objectives of Sri Lanka’s IMF-supported Program.

“During the restricted discussions, Sri Lanka and the Steering Committee also progressed discussions on certain non-financial provisions.

Sri Lanka would like to thank the Steering Committee, the Group and their advisors for their close collaboration and valuable contribution in the Meetings, and looks forward to further constructive interaction to finalise the ISB restructuring.”