Fitch assigns SriLankan Airlines’ guaranteed USD bonds ‘B’ final rating

Sep 19, 2019 (LBO) – Fitch Ratings has assigned a final ‘B’ rating to SriLankan Airlines Limited’s (SLA) USD175 million government-guaranteed 7 percent unsecured bonds due 25 June 2024.

The rating agency said the final rating on the bonds is in line with the expected rating assigned on 19 June 2019, and follows the receipt of final documents conforming to information received earlier.

The issuance proceeds were used to repay the company’s USD175 million bond due 27 June 2019.

Key Rating Drivers

The bonds are rated at the same level as the bonds issued by SLA’s parent, the government of Sri Lanka (B/Stable), due to the unconditional and irrevocable guarantee provided by the government. The government’s bonds are, in turn, rated in line with the sovereign’s Long-Term Issuer Default Rating (IDR) of ‘B’. The payment obligations arising under the guarantee rank pari passu with all other present and future, unconditional, unsecured and unsubordinated obligations of the government. The state held 99.5% of SLA as of end-May 2019 through direct and indirect holdings

Derivation Summary

Fitch has rated SLA’s US dollar bonds at the same level as the sovereign rating due to the unconditional and irrevocable guarantee provided by the government. The rating is not derived from SLA’s Standalone Credit Profile and thus is not comparable with that of its industry peers.

RATING SENSITIVITIES

The rating of the bond would be sensitive to any changes in Sri Lanka’s Long-Term IDR.