A Colombo court has intervened to temporarily stop the winding-up of SriLankan Airlines over unpaid bond debts totaling $209 million. The case, involving global trustees and high-level restructuring efforts, now puts the spotlight on the airline’s financial turmoil and the government’s guarantee of sovereign debt.
The Commercial High Court of Colombo has issued a 14-day enjoining order blocking legal proceedings aimed at winding up SriLankan Airlines over unpaid international bond obligations totaling $209.3 million.
The ruling, handed down by Commercial High Court Judge Amali Ranaweera on Wednesday, July 2, restrains DB Trustees (Hong Kong) Ltd. and Law Debenture Trust (Asia) Ltd. from initiating liquidation proceedings against the national carrier. The case centers on a $175 million 7% government-guaranteed bond that matured on June 25, 2024.
The order follows a legal warning issued on June 11, 2025, by Law Debenture Trust (Asia) Ltd., acting as trustee, which signaled the airline’s failure to repay both the bond principal and associated coupon payments under Section 272(a) of the Companies Act No. 7 of 2007.
Court documents reveal SriLankan Airlines has defaulted on the $175 million principal and missed $34.3 million in coupon payments across four dates: December 25, 2022; June 25, 2023; December 25, 2023; and June 25, 2024.
Lawyers representing SriLankan Airlines argued that neither DB Trustees nor Law Debenture Trust are direct creditors and thus lack the legal standing to file for winding-up proceedings. The court was also informed that the bonds in question are backed by the Government of Sri Lanka, which is actively engaged in a broader sovereign debt restructuring initiative.
Deputy Solicitor General Viraj Dayaratne, appearing on behalf of the Attorney General, reaffirmed the government’s guarantee on the bonds and its commitment to restructuring both sovereign and guaranteed obligations.
In light of these circumstances, the court moved to block any action or liquidation process for a two-week period to allow space for negotiation.
To support its restructuring efforts, SriLankan Airlines has retained Lazard Frères SAS as its international financial advisor and Norton Rose Fulbright LLP as its legal advisor. These firms are currently negotiating potential repayment plans related to the 2024 bonds.
The court will convene next to determine whether the enjoining order will be extended or modified depending on the airline’s ongoing negotiations with bondholders.
