US backs Sri Lanka’s appeal to put on hold Bondholder Lawsuit for 5 months
By: Staff Writer
March 21, Colombo (LNW): The United States Government has endorsed Sri Lanka’s request for an additional five-month extension of proceedings in the case filed 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.
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.
Applauding Sri Lanka’s efforts in its debt restructuring program and the strides made, the US views an extended stay as a reasonable measure aligned with US policy.
In a letter addressed to US District Judge Denise L. Cote, the Department of Justice affirmed Sri Lanka’s strategic importance as a key partner in the Indo-Pacific region where the US government wholeheartedly backs Sri Lanka’s endeavours toward economic recovery and its ongoing advancements within the IMF program.
This support also extends to Sri Lanka’s economic and governmental reforms initiatives, aimed at fostering sustainable economic growth and development.
Highlighting the adverse effects of failed debt restructuring, the Department of Justice said: “As the Court previously held, a breakdown in restructuring negotiations could threaten Sri Lanka’s progress towards International Monetary Fund (IMF) targets, its economic recovery, and the well-being of its citizenry.
By contrast, a stay significantly benefits the interest of Sri Lanka’s bilateral creditors and private commercial creditors who are actively involved in the debt restructuring negotiations. It also supports the public interest. Those same grounds for granting the first stay apply to Sri Lanka’s motion for a further stay.”
For decades, the US has been significantly interested in the orderly and cooperative resolution of sovereign debt defaults, which is crucial to the stability and future growth of the world and the US economy.
“In October, the United States assessed that a stay would facilitate an orderly and consensual sovereign debt restructuring process, as the expectation is that the Official Creditors Committee (OCC) and other bilateral creditors will reach consensus on debt treatment terms.
Sri Lanka is to seek comparable treatment from its commercial creditors and other official bilateral creditors—by the end of the year, with the process for implementing those terms via bilateral agreements between the respective creditor countries and Sri Lanka Underway.
It explained that a stay would also facilitate negotiations with private creditors, an estimated majority of which, through the Ad Hoc Bondholders Group, have conditioned their participation on the application of comparable treatment.
Since the Statement of Interest was filed and the Court granted the stay of proceedings, Sri Lanka has made demonstrable progress on its debt restructuring. Sri Lanka has been proceeding in negotiations with official creditors in good faith.
