Sodali & Co Concludes 2024 with Milestone in Sovereign Debt Restructuring

Following recent successes in sovereign debt restructurings for Ukraine, Ghana, and Zambia, Sodali & Co is proud to have contributed to the successful completion of Sri Lanka's US$12.5 billion external sovereign bond restructuring. This achievement marks another milestone for our Global Debt Services Team, which served as the Information, Tabulation, and Exchange Agent. We collaborated with Lazard and Clifford Chance as advisors to Sri Lanka and Citi as Dealer Manager. 

A Unique and Groundbreaking Transaction 

Unprecedented Clearing Systems Migration  

This restructuring is remarkable not only for its scale but also for its groundbreaking clearing systems 'switch.' For the first time, sovereign debt underwent a migration of its entire bond curve from one clearing system to another. The original bonds, cleared in the US Depository Trust Company (DTC), were replaced with new bonds cleared in Euroclear and Clearstream in Europe and a smaller portion in Lanka Settle in Sri Lanka. 

Sodali & Co undertook the daunting task of collecting account details from bondholders on a large scale to ensure seamless settlement across these newly designated clearing systems. This comprehensive shift in the debt structure infrastructure represents an unprecedented achievement in sovereign debt restructurings. 

Additional Complex Features  

The transaction incorporated several other intricate elements: 

1. The use of a bifurcated procedure for local vs. international holders using Unique Identifier Codes for the Local Bonds Option, ensuring accurate matching of holdings and distribution of new LKR-denominated Bonds 

2. Incorporating a ‘pumpkin’ mechanism capable of delivering overall success across numerous series of Collective Action Clause (CAC) and non-CAC bonds 

3. Exclusion of the existing “2022 Bonds” from the consent solicitation due to ongoing litigation while still allowing holders to participate in the Exchange Offer. 

Successful Outcome 

Despite these numerous challenges, Sri Lanka achieved a successful outcome. The Sodali & Co team efficiently processed nearly 5,000 bondholder instructions, achieving an impressive 96% participation rate. On the settlement date, we ensured the timely settlement of approximately 35,000 separate credits of new bonds, with a total face value of approximately US$11 billion. 

Market Leadership Reinforced 

This success underscores Sodali & Co's expertise and market leadership in sovereign debt restructurings. By executing such a large-scale and complex transaction, we have demonstrated our ability to deliver innovative solutions tailored to the unique refinancing needs of sovereign clients, which further cements our reputation as the number one partner in the implementation of sovereign debt restructurings. 

Deborah Zandstra, Partner, Capital Markets, Clifford Chance, said, "The Sodali & Co team were excellent throughout the transaction, contributing from the structuring stage to documentation, launch, and settlement. Their extensive deal experience and understanding of the clearing systems, operational constraints, and requirements were key to the smooth implementation of this most complex debt exchanges. The team was very supportive, hands-on, informative, and a pleasure to work with throughout the process. I thoroughly recommend them!" 

Learn more about our Global Debt Services and discover how Sodali & Co. continues to lead the way in sovereign debt restructuring.