By The progress of Sri Lanka’s IMF loan restructuring very much depends on a US court ruling .
A investor Hamilton Reserve has sued to force payment on one series of bonds.
A US court had stayed proceedings of this case field by holdout investor Hamilton Reserve for six months, which has the required volumes of bond with a ‘single series’ collective action clause to file action following request which was supported by the US, UK and France.
The deadline runs out on February 29.
In simple terms, the impact of the court order on the restructuring process in Sri Lanka is that it might delay the country’s efforts to manage its debt. Here’s a breakdown:
Court Order Details:
A court in the United States has put a pause on a case brought by an investor called Hamilton Reserve for six months.
This investor wants payment on a specific set of bonds, and the court order gives them time to pursue this.
Impact on Restructuring:
Sri Lanka is currently working on restructuring its debt, which means making changes to how it owes money to bondholders to make it more manageable.
The court order might affect the timeline for this restructuring process.
Deadline Concerns:
There is a deadline for certain actions related to this case, and it ends on February 29.
There is a possibility that Sri Lanka might request an extension of at least three months to complete the debt restructuring.
Negotiations and Challenges:
Sri Lanka has rejected a proposal by bondholders that involves exchanging a type of bond linked to the country’s economic performance.
Bondholders are interested in a particular structure, and convincing them to accept a different solution might be challenging.
There is also concern about the growth projections made by the International Monetary Fund (IMF), with bondholders thinking they are too pessimistic.
Bondholders’ Views:
Bondholders are not happy with what they perceive as slow progress in negotiations with Sri Lanka.
Some bondholders feel that Sri Lanka’s initial request for debt restructuring was more significant than what was offered by other countries.
Possible Extensions:
The court order might lead to a request for an extension of the deadline to complete the bond restructuring, but it’s uncertain whether the courts will grant it.
In summary, the court order could impact the timing of Sri Lanka’s debt restructuring efforts, and negotiations with bondholders are facing challenges, including disagreements on proposed solutions and concerns about growth projections.
