SriLankan Airlines Limited’s (SLA) payment of USD 6.125 million interest on its government-guaranteed USD 175 million unsecured notes within the 30-day grace period has no impact on the notes’ long-term rating of ‘C’, Fitch Ratings says.

The notes, which are due in 2024, remain in breach of two specific events of default tied to the guarantor – the government of Sri Lanka - as governed by the notes’ trust deed. They are (i) the government’s 12 April 2022 announcement of a moratorium on the payment of principal and interest on its external debt, and (ii) the government’s default on the payment of interest on an external debt amount exceeding USD 25 million in April 2022, and the expiry of the associated grace period in May 2022.

In addition, the debt moratorium overhang affecting external debt of the government and that of public sector borrowers such as SLA is still in place, which Fitch views as a continuation of a default-like process for affected obligors.

These events are consistent with our definition for the long-term rating of ‘C’.