US intervenes in Hamilton Bank bond case amidst SL bond restructure
By: Staff Writer
Colombo (LNW): In the backdrop of Sri Lanka Central Bank’s delay in implementing the domestic debt restructuring process, the United States government has asked a federal court in New York to delay judgment as it may intervene in the case between the Government of Sri Lanka and Hamilton Reserve Bank.
Hamilton Reserve Bank has sued the SL government for the recovery of US$250 million in bonds that it has defaulted last year, the global economic media giant Financial Times has reported from New York.
Governor of the Central Bank of Sri Lanka (CBSL), Nandalal Weerasinghe who was named amongst the 21 Bank Governors listed in the Global Finance has accepted the fact that they have not been able to complete commitments under the US$3 billion IMF extended fund facility programme.
The reason for the delay in the fulfilment of IMF EFF commitments was the ongoing court cases against debt optimization programmes, Weerasinghe who was amongst the 10 governors who earned an ‘A-’ grade claimed.
Sri Lanka has filed a motion to stay the judgment of U.S. District Court for a period of six months until it carries out negotiations on sovereign debt restructuring with sovereign and commercial creditors (foreign governments and foreign funds including banks).
The United States Attorney for the Southern District of New York, Damian Williams, has sent a letter dated August 30 2023 to U.S. District Judge Denise Cote, the judge hearing the case, to inform the court of the “potential participation of the United States Government” in the case.
“The United States is actively considering whether to file a Statement of Interest with respect to the pending motion to stay”.
“The United States expects that it will be in a position to inform the Court of its potential participation in this matter, and to file its Statement of Interest should it be authorized to do so (by the Department of Justice), no later than October 2, 2023,” the letter states.
“The Government respectfully requests that the Court reserve decision on the pending motion to stay until the United States has had an opportunity to submit any such statement of interest,” the letter adds.
The case was filed in June 2022 after Sri Lanka declared bankruptcy and defaulted on $1 billion of this particular bond issue, of which Hamilton Reserve Bank holds $ 250 million.
A judgment in favor of Hamilton Bank would potentially prevent the GOSL from including the bonds held by Hamilton Bank in any debt restructuring process.
Sri Lanka’s Finance Ministry has not yet issued a statement on the latest developments in the case. Sri Lanka Central Bank Governor expressed confidence in fulfilling the commitments and implementing all reform targets before the next Executive Board Meeting of the International Monetary Fund (IMF) in November 2023.