Sri Lanka Sued by Bondholder in US After Historic Default

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Sri Lanka was sued in the US by a bondholder after the South Asian nation defaulted on its debt for the first time in history while struggling to stop an economic meltdown, Bloomberg News reported. Hamilton Reserve Bank Ltd., which holds more than $250 million of Sri Lanka’s 5.875% International Sovereign Bonds due July 25, filed the suit Tuesday in a New York federal court seeking full payment of principal and interest. The bank’s holding represents more than 25% of the aggregate amount of the bonds, which, per the indenture, would likely enable it to block an undesired modification to the notes. Sri Lanka, an island nation off the southern tip of India, fell into default in May after the expiry of a 30-day grace period for missed interest payments on two of its sovereign bonds. It was the first sovereign debt default by the country since it gained independence from Britain in 1948. Hamilton Reserve, based in St. Kitts & Nevis, said in the lawsuit that the default is being “orchestrated by officials at the highest levels of government,” including the ruling Rajapaksa family, and accused Sri Lanka of excluding bonds held by domestic banks and other interested parties from an announced debt restructuring. Read More.

More than 30 asset managers holding Sri Lanka's international bonds announced on Tuesday the formal launch of a creditor group to start debt restructuring talks with the island nation, according to a statement from legal adviser White & Case LLC, Reuters reported. Amundi Asset Management, BlackRock, HBK Capital Management, Morgan Stanley Investment Management and T. Rowe Price Associates Inc. are among members of the group's steering committee, which has Rothschild & Co as financial adviser. "The Group is broadly representative of Sri Lanka’s bondholder base, both by type of institution and by geography, and holds Bonds across each outstanding series," the statement added, though it didn't specify the percentage of bonds it holds on the outstanding $12.6 billion overseas sovereign debt. Sri Lanka has hired heavyweight financial and legal advisers Lazard and Clifford Chance as it prepares for the difficult task of renegotiating its complex web of creditors, including bilateral lending from Japan, India and China. The creditor group said that it was ready to engage in talks with both Sri Lanka's authorities and other creditors, adding that the country should "implement a package of meaningful reforms and fiscal adjustments." Read More.

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