The Fitch Ratings has decided to withdraw its ratings and analytical coverage of SriLankan Airlines citing commercial reasons. This decision marks a critical juncture for the troubled airline, which has faced mounting financial challenges in recent years.
Fitch Ratings announced yesterday the withdrawal of its ratings on SriLankan Airlines, including its assessment on the US$ 175 million government-guaranteed 7 percent unsecured bonds, due 25 June 2024. The agency had affirmed a ‘C’ rating on these bonds, primarily due to the unconditional guarantee provided by the Sri Lankan government. However, the airline has failed to meet its obligations, with both principal and interest payments due on 25 June 2024 currently in a 30-day grace period. This follows previous defaults on similar payments dating back to December 2022.
The situation worsened with the Sri Lankan government’s announcement on 12 April 2022, declaring a debt moratorium that included several categories of external debts for sovereign and public-sector entities. This action triggered another default event, reflecting the broader economic challenges facing the country.
Fitch’s decision not to assign a Recovery Rating to the bonds underscores the agency’s pessimism regarding recovery prospects following default. The agency noted that bonds from issuers on the brink of default typically offer little distinction in recovery potential.
Earlier this month, Sri Lanka’s Ministry of Ports and Aviation confirmed the lack of suitable investors interested in acquiring the debt-laden national carrier. Consequently, the government has opted to pursue restructuring efforts rather than proceeding with plans to sell the airline outright, citing minimal global interest.
The withdrawal of Fitch Ratings’ coverage and the ongoing financial turmoil pose significant challenges for SriLankan Airlines, as it navigates a precarious financial landscape amid broader economic uncertainties in the region.
