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* Fitch Affirms SriLankan Airlines’ Government-Guaranteed Bonds at ‘C’
Sat, May 21, 2022, 09:12 am SL Time, ColomboPage News Desk, Sri Lanka.

May 21, Colombo: itch Ratings has affirmed the rating on SriLankan Airlines Limited’s (SLA) USD175 million government-guaranteed 7% unsecured bonds due 25 June 2024 at ‘C’.

The affirmation follows the 19 May 2022 downgrade of Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘RD’ from ‘C’, and the downgrade of its foreign-currency bonds issued in international markets to ‘D’ from ‘C’.

KEY RATING DRIVERS

SLA in Default-Like Process: SLA’s guaranteed bonds are part of the debt moratorium announced on 12 April 2022 by the government of Sri Lanka, on several categories of sovereign- and public sector entities’ external debt. The moratorium has therefore triggered the commencement of a default-like process for SLA, in Fitch’s view.

Bonds Factor in Recovery Prospects: SLA’s bonds are rated ‘C’ factoring in Fitch’s view of average- to- below average recovery prospects following a default, in line with the agency’s Corporates Recovery Ratings and Instrument Ratings criteria, and Country-Specific Treatment of Recovery Ratings criteria. Ratings assigned to bonds of issuers who are very close to default show little distinction between RR4-RR6. Therefore, Fitch has not assigned a Recovery Rating to the bond.

DERIVATION SUMMARY

SLA’s US dollar bonds are part of the Government of Sri Lanka’s debt moratorium. SLA’s bond rating based on Fitch’s assessment of average- to below average recovery prospects to investors, based on Fitch’s Corporates Recovery Ratings and Instrument Ratings Criteria, and Country-Specific Treatment of Recovery Ratings Criteria.

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