SriLankan Airlines borrows $175mn to pay creditors: report

Mar 18, 2012 (LBO) – SriLankan Airlines is to get a loan of 175 million US dollars (21.8 billion rupees) from the Mashreq Bank in the United Arab Emirates to pay its creditors, the Sunday Times newspaper said. Sri Lanka’s Cabinet of ministers has agreed to offer a government guarantee to the national carrier to obtain the loan, it said.

The loan comes in the wake of a plan in February this year by government to invest in a five year Treasury Bond to the value of 125 million dollars to SriLankan Airlines as equity funding.

The bond will help strengthen the balance sheet of the airline and resolve the negative equity position which helps it to go for additional borrowings, the newspaper quoted Civil Aviation Minister Priyankara Jayaratne as telling the Cabinet in a Cabinet Memorandum.

However, the paper said, Jayaratne has not disclosed how the Mashreq Bank was chosen for the loan under an Islamic Shariah Compliant Facility, only having pointed out that the state-owned Bank of Ceylon had introduced Mashreq Bank as a potential lender.

“Thus, the process adopted for the selection and whether more favourable terms from other sources could have been obtained are not clear,” Sunday Time