In its lawsuit, the bondholder said the default was being “arranged by officials at the highest levels of government”.
Sri Lanka has been sued by a bondholder in the US after the South Asian nation defaulted on its debt for the first time in its history while struggling to avert an economic crisis.
Hamilton Reserve Bank Ltd., which holds more than $250 million of Sri Lanka’s 5.875% International Sovereign Bonds due on July 25, filed a lawsuit Tuesday in New York federal court to request full payment of principal and interest.
Sri Lanka, an island nation located off the southernmost tip of India, fell into default in May after a 30-day grace period expired for missing interest payments on two of its national bonds. This is the country’s first sovereign debt since it gained independence from Britain in 1948.
Hamilton Reserve, based in St. Kitts & Nevis, said in the lawsuit that the default was “arranged by officials at the highest levels of government,” including the ruling Rajapaksa family, and accused Sri Lanka of excluding bonds issued by the government. domestic bank holdings and other interested parties from an announced debt restructuring.
“As a result, these preferred Sri Lankan parties will be fully paid in both principal and interest, while the Bonds – which are also widely held by US pension systems including Fidelity Investments, BlackRock , T. Rowe Price, Lord Abbett, JPMorgan, PIMCO Neuberger Berman and other US investors – remain in default indefinitely and unpaid, leaving US retirees to bear the brunt of the losses. may be up to 80% of the value of their initial investment,” Hamilton Reserve attorneys said in their complaint.
Bloomberg reportciting people familiar with the deal, who requested anonymity before the official announcement.
The island nation is grappling with a deepening humanitarian crisis after it ran out of dollars to buy food and imported fuel, driving inflation to 40% and forcing a debt default. Sri Lanka needs $5 billion to ensure “uninterrupted daily life” and another $1 billion to strengthen the rupee, Prime Minister Ranil Wickremesinghe told parliament earlier this month.
Sri Lanka has hired Lazard Ltd. and Clifford Chance LLP in May to serve as financial and legal advice on debt restructuring as the country seeks a bailout from the International Monetary Fund.
Sri Lankan authorities on Monday start talking with the IMF, working to strike a deal that could give creditors enough comfort to lend new funds to the bankrupt country seeking $6 billion in the coming months.
The suit is Hamilton Reserve v. Sri Lanka, 22-cv-5199, United States District Court, Southern District of New York (Manhattan).