REG - Sri Lanka (Republic) - Announcement of Agreement in Principle

GDS HoldingsAnnouncement

19/09/2024 12:00

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RNS Number : 8800E  Sri Lanka (G.D.S. Republic of)  19 September 2024

NOT FOR DISTRIBUTION IN ANY JURISDICTION IN WHICH SUCH DISTRIBUTION WOULD BE
PROHIBITED BY APPLICABLE LAW

THIS ANNOUNCEMENT SHALL NOT CONSTITUTE AN OFFER TO PURCHASE OR A SOLICITATION
OF AN OFFER TO SELL ANY OF THE SECURITIES DESCRIBED HEREIN, NOR SHALL THERE BE
ANY OFFER OR SALE OF SUCH SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL

     ANNOUNCEMENT BY THE GOVERNMENT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI
     LANKA (THE "ISSUER") IN RELATION TO THE FOLLOWING SERIES OF BONDS ISSUED BY
     THE ISSUER:
     U.S.$1,000,000,000 6.85% BONDS DUE 2024
     Rule 144A ISINs: US85227SAY28; Reg S ISIN: USY8137FAN88
     U.S.$500,000,000 6.35% BONDS DUE 2024
     Rule 144A ISINs: US85227SBA33; Reg S ISIN: USY8137FAQ10
     U.S $1,400,000,000 7.85% BONDS DUE 2029
     Rule 144A ISINs: US85227SAZ92; Reg S ISIN: USY8137FAP37
     U.S $1,500,000,000 7.55% BONDS DUE 2030
     Rule 144A ISINs: US85227SBB16; Reg S ISIN: USY8137FAR92
     (the "Bonds")

SRI LANKA REACHES AGREEMENT IN PRINCIPLE WITH EACH OF THE AD HOC GROUP OF
BONDHOLDERS, THE LOCAL CONSORTIUM OF SRI LANKA AND CHINA DEVELOPMENT BANK ON
DEBT RESTRUCTURING TERMS

Colombo, Sri Lanka, 19 September 2024 - The Government of the Democratic
Socialist Republic of Sri Lanka ("Sri Lanka") announces today that it has held
restricted discussions between 12 September 2024 and 18 September 2024 (the
"Restricted Period") with nine members of the steering committee (the
"Steering Committee") of the Ad Hoc Group of Bondholders (the "Group") who
agreed to take part in such restricted discussions (the "Restricted Members of
the Steering Committee"). 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 LLP and Rothschild & Co,
respectively. The Steering Committee, as a whole, comprises ten of the largest
members of the Group, with the Group controlling approximately 40% of the
aggregate outstanding amount of the Bonds.

Sri Lanka also announces today that in the last year it has held restricted
discussions with members of the Local Consortium of Sri Lanka ("LCSL"), joined
by its legal and financial advisors, Baker McKenzie and Newstate Partners LLP,
respectively. The LCSL comprises 11 members, controlling approximately 12% of
the aggregate outstanding amount of the Bonds.

During the discussions with the Restricted Members of the Steering Committee,
the parties  discussed the conclusions of the consultations carried out
throughout the summer between Sri Lanka, its advisors, the Group's advisors,
the International Monetary Fund (the "IMF") and Sri Lanka's Official Creditor
Committee (the "OCC"), in respect of the joint working framework on a debt
treatment agreed between Sri Lanka and the Restricted Members of the Steering
Committee, on behalf of the Group, in June 2024 (as announced on 3 July 2024)
(the "JWF"). During these consultations, IMF staff determined that the JWF was
not consistent with the parameters of Sri Lanka's IMF-supported Program and
the OCC expressed concerns regarding the consistency of the JWF with the
comparability of treatment principle ("Comparability of Treatment"). It became
clear, during these consultations, that further work was necessary to arrive
at an agreement in principle between the parties which would receive a
favourable assessment from both IMF staff and the OCC.

Following an iterative process with IMF staff at technical level and taking
account of the feedback received from the OCC regarding the terms of the JWF,
Sri Lanka and its advisors designed a revised debt treatment. The revised debt
treatment was based on the JWF, with amendments designed to ensure compliance
with the parameters of Sri Lanka's IMF-supported Program and the Comparability
of Treatment principle, while preserving the Group's and Sri Lanka's interests
to the fullest possible extent. The revised debt treatment was presented to
and discussed with the Restricted Members of the Steering Committee, in
conjunction with the terms of an alternative restructuring option (the "Local
Option"), which was concurrently presented and discussed with the LCSL. The
Local Option was developed in response to a request by the LCSL over a number
of months in which Sri Lanka, its advisors, the LCSL and its advisors
exchanged alternative proposals.

At the conclusion of the Restricted Period, Sri Lanka is pleased to report
that it has reached an agreement in principle with the Restricted Members of
the Steering Committee, on behalf of the Group, on the terms of a
comprehensive restructuring of the Bonds (the "Agreement in Principle"), the
key financial terms of which are included in the Annex to this announcement.

During the discussions with the Restricted Members of the Steering Committee
during the Restricted Period, the parties thereto also discussed and agreed
the inclusion of governance-linked bond features in the terms of the plain
vanilla bond instrument that forms part of the revised debt treatment.

At the same time, Sri Lanka is also pleased to report that it has reached an
agreement in principle with the LCSL on the key financial terms of the Local
Option, the key financial terms of which are also included in the Annex to
this announcement. It has further been agreed that the Local Option would be
offered to all holders of the Bonds, subject to a cap tentatively set at 25%
of the aggregate outstanding amount of the Bonds, with priority given to local
holders of the Bonds, and pro-rata allocation of the balance between
consenting international holders of the Bonds who have opted for the Local
Option.

During the Restricted Period, Sri Lanka also progressed discussions and
reached an agreement in principle with the Restricted Members of the Steering
Committee on certain non-financial provisions relating to the restructuring of
the Bonds, including a loss reinstatement provision, a most favoured creditor
clause and certain ongoing information disclosure requirements. A mechanism to
change the governing law of the New York law governed new securities to
English or Delaware law with the consent of a supermajority of bondholders if
proposed by holders of 20% of any particular series of the new securities was
also agreed.  In addition, Sri Lanka agreed with the Restricted Members of
the Steering Committee and the LCSL on matters relating to the reimbursement
of certain expenses of the Steering Committee and the LCSL.

In respect of the Local Option, Sri Lanka and the LCSL have agreed the USD
Bond (as defined in the Annex to this announcement) shall include a provision
whereby Sri Lanka would have the option, at its sole discretion, to make debt
service payments in LKR rather than USD, at the then prevailing exchange rate
, if Sri Lanka is, in its determination, unable to make such debt service
payments in USD on the contractual payment dates.

Sri Lanka has agreed with the Restricted Members of the Steering Committee, on
behalf of the Group, and the LCSL to proceed with the implementation of the
restructuring of the Bonds on the basis of the Agreement in Principle and the
Local Option.

Having received informal confirmation from IMF staff during the Restricted
Period, Sri Lanka now expects to receive formal confirmation from IMF staff
that the Agreement in Principle and the Local Option, taken together, are
fully consistent with the parameters of Sri Lanka's IMF-supported Program. In
parallel, Sri Lanka will continue to work with the OCC and its Secretariat to
secure confirmation of compliance of the Agreement in Principle and the Local
Option with the Comparability of Treatment principle. Upon receiving such
confirmations, Sri Lanka commits to use its best efforts to expedite the
implementation of the restructuring in respect of the Bonds.

Finally, Sri Lanka is pleased to report having finalized agreement in
principle with China Development Bank ("CDB") on the key financial terms of
the restructuring of approximately U.S.$3.3bn of debt, based on an initial set
of terms agreed in May 2024 following several months of good faith
engagement. While the terms initially agreed in principle were confirmed to
be compatible with Sri Lanka's IMF-supported Program parameters, further
consultations with the OCC over the summer were necessary in relation to the
Comparability of Treatment principle. Following the finalization of this
agreement in principle, Sri Lanka expects to receive formal confirmation from
IMF staff and the OCC and to be able to move to documentation shortly
thereafter.

The agreements in principle with the Group, the LCSL and CDB, which were
approved by the Cabinet of Ministers of Sri Lanka earlier today, almost
completes Sri Lanka's sovereign debt restructuring exercise, as agreed under
Sri Lanka's IMF-supported Program to restore debt sustainability.

Sri Lanka would like to thank the Group and its advisors, the LCSL and its
advisors, and CDB and its advisors, for their close collaboration and
continuous support throughout the negotiations.

The restructuring of the Bonds will be implemented through an exchange offer
and/or consent solicitation. Implementation of the restructuring of the Bonds
remains subject to agreement between Sri Lanka, the Group and the LCSL on the
definitive legal documentation for the new securities and exchange offer
and/or consent solicitation. The restructuring of the abovementioned debt with
CDB remains subject to agreement between Sri Lanka and CDB on the definitive
legal documentation.

This announcement is made by Sri Lanka and constitutes a public disclosure of
inside information under Regulation (EU) 596/2014 as it forms part of domestic
law of the United Kingdom by virtue of the European Union (Withdrawal) Act
2018 ("EUWA") ("UK MAR").

***

This press release does not constitute an offer of the new securities for sale
in the United States, and the new securities (if issued) will not be
registered under the U.S. Securities Act of 1933, as amended (the "Securities
Act") or the securities laws of any state of the United States and they may
not be offered or sold within the United States, except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state or local securities
laws. This press release does not constitute an offer of the new securities
for sale, or the solicitation of an offer to buy any securities, in any state
or other jurisdiction in which any offer, solicitation or sale (if made) would
be unlawful. Any person considering making an investment decision relating to
any securities must inform itself independently based solely on an offering
memorandum to be provided to eligible investors in the future in connection
with any such securities before taking any such investment decision.

This announcement is directed only to beneficial owners of the Bonds who are
(A) "qualified institutional buyers" within the meaning of Rule 144A under the
Securities Act or (B) outside the United States in offshore transactions in
compliance with Regulation S under the Securities Act, that may lawfully
participate in the restructuring of the Bonds in compliance with applicable
laws of applicable jurisdictions.

No offer of any kind is being made to any beneficial owner of Bonds who does
not meet the above criteria or any other beneficial owner located in a
jurisdiction where the offer would not be permitted by law.

Forward-Looking Statements

All statements in this press release, other than statements of historical
fact, are forward-looking statements. These statements are based on
expectations and assumptions on the date of this press release and are subject
to numerous risks and uncertainties which could cause actual results to differ
materially from those described in the forward-looking statements. Risks and
uncertainties include, but are not limited to, market conditions and factors
over which Sri Lanka has no control. Sri Lanka assumes no obligation to update
these forward-looking statements and does not intend to do so, unless
otherwise required by law.

Notice to Investors in the European Economic Area and the United Kingdom

Notice to EEA and UK retail investors

The announcement contained in this press release is not being directed to any
retail investors in the European Economic Area ("EEA") or in the United
Kingdom ("UK"). As a result, no "offer" of new securities is being made to
retail investors in the EEA or in the UK.

This announcement is only directed to beneficial owners of Bonds who are (i)
within a Member State of the European Economic Area if they are "qualified
investors" as defined in Regulation (EU) 2017/1129 and (ii) within the United
Kingdom they are "qualified investors" as defined in Regulation (EU) 2017/1129
as it forms part of domestic law by virtue of the EUWA.

The new securities are not intended to be offered, sold or otherwise made
available to and should not be offered, sold or otherwise made available to
any retail investor in the EEA. For these purposes, a "retail investor" means
a person who is one (or more) of: (i) a retail client as defined in point (11)
of Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II"); or (ii) a
customer within the meaning of Directive (EU) 2016/97 (as amended), where that
customer would not qualify as a professional client as defined in point (10)
of Article 4(1) of MiFID II.

The new securities are not intended to be offered, sold or otherwise made
available to and should not be offered, sold or otherwise made available to
any retail investor in the UK. For these purposes, a "retail investor" means a
person who is one (or more) of: (i) a retail client as defined in point (8) of
Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by
virtue of the EUWA; or (ii) a customer within the meaning of the provisions of
the Financial Services and Markets Act 2000 (the "FSMA") and any rules or
regulations made under the FSMA to implement Directive (EU) 2016/97, where
that customer would not qualify as a professional client, as defined in point
(8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of
domestic law by virtue of the EUWA.

Consequently no key information document required by Regulation (EU) No
1286/2014 (as amended, the "EU PRIIPs Regulation") or by Regulation (EU) No
1286/2014 as it forms part of domestic law by virtue of the EUWA (as amended,
the "UK PRIIPS Regulation") for offering or selling the new securities or
otherwise making them available to retail investors in the EEA or the UK has
been prepared and therefore offering or selling the new securities or
otherwise making them available to any retail investor in the EEA or the UK
may be unlawful under the EU PRIIPs Regulation and the UK PRIIPs Regulation.

United Kingdom

For the purposes of section 21 of the FSMA, to the extent that this
announcement constitutes an invitation or inducement to engage in investment
activity, such communication falls within Article 34 of the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the
"Financial Promotion Order"), being a non-real time communication communicated
by and relating only to controlled investments issued, or to be issued, by Sri
Lanka.

Other than with respect to distributions by Sri Lanka, this announcement is
for distribution only to persons who (i) are outside the UK or (ii) have
professional experience in matters relating to investments falling within
Article 19(5) of the Financial Promotion Order or (iii) are persons falling
within Article 49(2)(a) to (d) ("high net worth companies, unincorporated
associations etc.") of the Financial Promotion Order, or (iv) are persons to
whom an invitation or inducement to engage in investment activity (within the
meaning of section 21 of the FSMA) in connection with the issue or sale of any
securities may otherwise lawfully be communicated or caused to be communicated
(all such persons together being referred to as "relevant persons"). This
announcement is directed only at relevant persons and must not be acted on or
relied on by persons who are not relevant persons. Any investment or
investment activity to which the announcement relates is available only to
relevant persons and will be engaged in only with relevant persons.

Click on or paste the following link on your web browser to view the PDF
version of the Annex:

http://www.rns-pdf.londonstockexchange.com/rns/8800E_1-2024-9-19.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8800E_1-2024-9-19.pdf)

ANNEX

 

 

 

 

 

 

 

 

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