By Sri Lanka sent a new restructuring proposal to dollar bondholders through its adviser Lazard as the South Asian nation seeks to complete overhauling its defaulted debt, according to sources familiar with the matter. reported Bloomfield.
A counter proposal to a bondholder group’s offer in October for a 20% haircut and the issuance of macro-linked bonds was conveyed through Lazard,
Completing the overhaul of Sri Lanka’s $27 billion of foreign debt is critical to ensure financing from the International Monetary Fund bailout keeps flowing.
The government had already struck restructuring deals with official creditors, including China, India and the Paris Club as well as with holders of its local debt.
Who are these Bond Holders?
Due to privacy and regulatory reasons, the exact identities of Sri Lanka’s dollar bondholders are not publicly available. However, we can discuss various categories of these bondholders based on available information:
Investment Management Firms include large asset managers like BlackRock, Vanguard, and Fidelity Investments, who manage funds for pensions, endowments, and individuals.
Hedge Funds,Insurance Companies,Central Banks and Sovereign Wealth Funds,Individual Mutual Funds and Exchange-Traded Funds Lankan dollar bondholders are among bondholders.
Limitations:
It’s important to remember that this is just a general overview, and the actual breakdown of bondholders could be more diverse. Additionally, the ownership of bonds can change hands frequently, making it even more difficult to pinpoint specific holders at any given moment.
Reasons for acceptance:
Progress in domestic debt: Sri Lanka already completed a domestic debt restructuring with a 30% haircut. This could build trust and momentum for the external negotiations.
Preliminary agreement with non-Chinese bilateral creditors: This indicates progress with some stakeholders and strengthens the overall restructuring effort.
IMF support: The IMF program requires debt sustainability, and accepting a proposal that achieves this goal could unlock further financial assistance.
Pressure from economic hardship: Sri Lanka’s severe economic crisis incentivizes finding a solution to alleviate financial strains.
Reasons for potential rejection:
Details of the new proposal: Without publicly available details, it’s impossible to assess how attractive the offer is to bondholders.
Chinese creditor stance: China holds a significant portion of Sri Lankan debt and has reportedly preferred longer maturities over haircuts. Reconciling these stances may be challenging.
Holdout creditors: A single creditor refusing the terms could complicate the entire process.
Political uncertainty: Recent changes in Sri Lankan leadership could introduce new dynamics and potential delays.
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