Sri Lanka Sued Over Default For The First Time in History
Posted 22,June

By Chehan Jayasuriya

In Local News

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Sri Lanka was sued by Hamilton Reserve Bank Ltd., a bondholder of the island nation, over its debt default.

Sri Lanka announced a pause on debt servicing in April to slow down the economic tumble in the country. Sri Lanka officially defaulted in May, following the country’s failure to meet debt obligations at the end of the 30-day grace period. This is the first time Sri Lanka has gone into a debt default since gaining independence from the UK in 1948.

Hamilton Reserve Bank holds more than $250 million of Sri Lanka’s 5.875% International Sovereign Bonds which are due on July 25. The bank filed the suit in a New York federal court seeking total principal and interest payment.

Hamilton Reserve Bank stated that the default is being “orchestrated by officials at the highest levels of government,” including the Rajapaksa family, and accused the nation of excluding bonds held by domestic banks and other interested parties from an announced debt restructuring.

“As a result, these favored Sri Lankan parties stand to be paid principal and interest in full, while the Bonds — which are also broadly held by US retirement systems including Fidelity Investments, BlackRock, T. Rowe Price, Lord Abbett, JPMorgan, PIMCO, Neuberger Berman and other US investors — remain indefinitely in default and unpaid, causing American retirees tremendous suffering from potentially massive losses of up to 80% of their original investment value,” lawyers for Hamilton Reserve said in their complaint.

However, a group of Sri Lanka’s most prominent creditors has been set up, including Pacific Investment Management Co., T. Rowe Price Group Inc., and BlackRock Inc., with the hopes of starting restructuring talks soon.