Bondholders sue Sri Lanka in US court | Business & Economic News

The bondholders said in their lawsuit that the default was “orchestrated by officials at the highest levels of government.”

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Sri Lanka is being sued by bondholders in the United States after the South Asian country defaulted on its debt for the first time in its history while trying to prevent an economic collapse.

Hamilton Reserve Bank Ltd., which holds more than $250 million in Sri Lanka’s 5.875% international sovereign bonds due July 25, filed a lawsuit in New York federal court on Tuesday seeking full principal and interest payments.

Sri Lanka, an island nation at the southern tip of India, fell into default in May after failing to pay interest on two of its sovereign bonds after a 30-day grace period expired. It was the country’s first sovereign debt default since independence from Britain in 1948.

The St. Kitts and Nevis-based Hamilton Reserve Bank said in its lawsuit that the default was “orchestrated by officials at the highest levels of government”, including the ruling Rajapaksa family, and accused Sri Lanka of excluding domestic bank holdings. bonds and other stakeholders in announced debt restructurings.

“As a result, these favored Sri Lankan parties will receive full principal and interest payments, and these bonds are also widely held by the U.S. retirement system, including Fidelity Investments, BlackRock, T. Rowe Price, Lord Abbott, JPMorgan Chase , PIMCO, Neuberger Berman and other U.S. investors — in default and non-payment indefinitely, resulting in huge losses for U.S. retirees, possibly as much as 80% of the value of their original investments,” Hamilton Reserve’s attorneys said in the complaint. indicated in.

Sri Lanka’s largest group of creditors including Pacific Investment Management Co., T. Rowe Price Group Inc. and BlackRock Inc. has been formed, and restructuring talks are expected to begin soon, Bloomberg reportciting people familiar with the arrangement who requested anonymity before the official announcement.

The island nation is grappling with a worsening humanitarian crisis after running out of dollars to buy imported food and fuel, pushing inflation to 40 percent and forcing a default. Sri Lankan Prime Minister Ranil Wickremesinghe told parliament earlier this month that Sri Lanka needs $5 billion to ensure “daily life is not disrupted” and $1 billion to strengthen the rupee.

Sri Lanka hired Lazard Ltd. and Clifford Chance LLP in May as financial and legal advisers on debt restructuring as the country seeks a bailout from the International Monetary Fund.

Sri Lankan authorities on Monday start the conversation Work with the International Monetary Fund to reach a deal that could provide creditors with enough comfort to provide the bankrupt country seeking $6 billion in fresh funding in the coming months.

The case is Hamilton Reserve v. Sri Lanka, 22-cv-5199, U.S. District Court for the Southern District of New York (Manhattan).

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