Sri Lanka sued by bondholder in US after historic default

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Sri Lanka was sued in the US by a bondholder after the South Asian nation defaulted on its debt for the first time in history while struggling to stop an economic meltdown.

Hamilton Reserve Bank Ltd., which holds more than $250 million of Sri Lanka’s 5.875 per cent International Sovereign Bonds due 25 July, filed the suit Tuesday in a New York federal court seeking full payment of principal and interest.

Sri Lanka fell into default in May after the expiry of a 30-day grace period for missed interest payments on two of its sovereign bonds. It was the first sovereign debt default by the country since it gained independence from Britain in 1948.

Hamilton Reserve, based in St. Kitts & Nevis, said in the lawsuit that the default is being “orchestrated by officials at the highest levels of Government,” including the ruling Rajapaksa family, and accused Sri Lanka of excluding bonds held by domestic banks and other interested parties from an announced debt restructuring.

“As a result, these favoured 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.

(Bloomberg)