The Sri Lankan government plans to sell a 49% stake in flag carrier SriLankan Airlines (UL, Colombo Int'l) and will try to attract foreign investors by assuming some of the airline's legacy debt, business website Economy Next has reported.

According to the Public Private Partnership Agency's plan, the government would first apply for a USD500-600 million refinancing facility from the Asia Infrastructure Investment Bank. These funds would be used to assume some of SriLankan Airlines' debt to make the carrier more attractive to prospective investors.

The new debt would be placed in a government-owned special purpose vehicle. As such, the prospective investor would not be responsible for liabilities.

The current debt of SriLankan Airlines is close to USD1 billion. The government said that the ongoing restructuring and the offloading of a part of the debt to the SPV would leave SriLankan Airlines with around USD200 million of liabilities.

The Public Private Partnership Agency has already prepared an information memorandum for prospective investors, even though the plan still needs approval from the government.

SriLankan Airlines is currently fully-owned by the government. In 1998, the airline sold a 40% stake in the airline, then dubbed AirLanka (UL, Colombo Int'l), to Emirates (EK, Dubai Int'l). The carrier was renationalised in 2008.