#SriLanka ISB holders Group insists that Domestic Debt is "reorganised"
This has both good as well as bad sides.
Let me tell you all about it, in English.
1/12
@CSE_Media #EconomicCrisisLK
This has both good as well as bad sides.
Let me tell you all about it, in English.
1/12
@CSE_Media #EconomicCrisisLK
The "Group"
• Known as "an ad-hoc creditor committee"
• Consists of 100+ foreign investors
• Led by a steering committee of 10+ members
• Represents over 55%+ of ISBs non- domestic holdings
• Advised by Rothschild and White & Case
Source: Min. of Finance (23.09.2022)
2/12
• Known as "an ad-hoc creditor committee"
• Consists of 100+ foreign investors
• Led by a steering committee of 10+ members
• Represents over 55%+ of ISBs non- domestic holdings
• Advised by Rothschild and White & Case
Source: Min. of Finance (23.09.2022)
2/12
Summary
• They are ready to hold debt restructuring talks - quickly and effectively
• They acknowledge Sri Lankan authorities’ engagement with official creditors toward a resolution of the current crisis and restoration of debt sustainability.
3/12
• They are ready to hold debt restructuring talks - quickly and effectively
• They acknowledge Sri Lankan authorities’ engagement with official creditors toward a resolution of the current crisis and restoration of debt sustainability.
3/12
However, their agreement is subject to following CONDITIONs:
• Domestic debt (debt governed by local law) is reorganized, while ensuring debt sustainability and safeguarding financial stability.
This includes all T Bills, T Bonds and SLDBs.
4/12
• Domestic debt (debt governed by local law) is reorganized, while ensuring debt sustainability and safeguarding financial stability.
This includes all T Bills, T Bonds and SLDBs.
4/12
https://Twitter.com/theGayan/status/1611965397582114816
Term "reorganise" implies they:
• do NOT expect a haircut
• do expect an extension of maturity, clipping of coupons, or both
See my thread below to understand the meaning of haircut and other terms.
5/12
• do NOT expect a haircut
• do expect an extension of maturity, clipping of coupons, or both
See my thread below to understand the meaning of haircut and other terms.
5/12
https://Twitter.com/theGayan/status/1587782609882714116
It's positive to see that the Group emphasise "safeguarding financial stability" while simultaneously referring to reorganisation of domestic debt.
This implies that they will not blindly push for a DDR which leaves all parties at a lose-lose situation.
This is sanity.
6/12
This implies that they will not blindly push for a DDR which leaves all parties at a lose-lose situation.
This is sanity.
6/12
Group emphasise to cap Annual GFN (Gross Financing Needs) from 2027 to 2032, at 13% of GDP.
This is in-line with IMF program targets.
See my below thread to know more about "GFN".
7/12
This is in-line with IMF program targets.
See my below thread to know more about "GFN".
7/12
https://Twitter.com/theGayan/status/1617497387974660096
GFN cap of 13% GDP is split between foreign (4.5%) and domestic (8.5%).
Given GFN was estimated to be ~38% in 2022, this is a tough ask, especially given the current stock of domestic debt and their cost.
This implies that reorganisation of domestic debt is inevitable.
8/12
Given GFN was estimated to be ~38% in 2022, this is a tough ask, especially given the current stock of domestic debt and their cost.
This implies that reorganisation of domestic debt is inevitable.
8/12
Other conditions:
1. Opportunity to express views on:
• econ. assumptions of IMF program targets
• adequacy/feasibility of adjustment efforts (mostly reforms/commitments by us)
This ensures that they have a say on the IMF targets and means of achieving those targets.
9/12
1. Opportunity to express views on:
• econ. assumptions of IMF program targets
• adequacy/feasibility of adjustment efforts (mostly reforms/commitments by us)
This ensures that they have a say on the IMF targets and means of achieving those targets.
9/12
Other conditions:
2. Apply the principle of comparable treatment in respect of the debt relief requested and obtained from all their remaining official bilateral creditors.
This seems mostly aimed at China.
10/12
2. Apply the principle of comparable treatment in respect of the debt relief requested and obtained from all their remaining official bilateral creditors.
This seems mostly aimed at China.
10/12
TL;DR
The Group:
• acknowledge our engagement with creditors
• ready for restructuring talks
• insist domestic debt is reorganised while safeguarding fin. stability
• insist a GFN cap of 13% GDP (foreign 4.5% + domestic 8.5%)
• insists on fair treatment & opportunity
11/12
The Group:
• acknowledge our engagement with creditors
• ready for restructuring talks
• insist domestic debt is reorganised while safeguarding fin. stability
• insist a GFN cap of 13% GDP (foreign 4.5% + domestic 8.5%)
• insists on fair treatment & opportunity
11/12
That's my summary on the letter by ISB holders group and what it means.
If you enjoyed this:
• follow me @TheGayan for more insights on #investing
• retweet the top tweet below to share with others 👇
12/12
If you enjoyed this:
• follow me @TheGayan for more insights on #investing
• retweet the top tweet below to share with others 👇
12/12
https://Twitter.com/theGayan/status/1621566166987841536
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