An Echelon Media Company
Monday February 6th, 2023

Sri Lanka sued by holdout Hamilton Reserve, other bondholders form group

ECONOMYNEXT – More than 30 bondholders said they have formed a group to negotiate with Sri Lanka after it defaulted on its foreign debt. Still, at least one holdout has sued the country in a US court demanding payment.

Hamilton Reserve, a St Kitts and Nevis based bank, has filed suit in the Federal Court of New York Southern District, advised by lawyers Bleichmar Fonti & Auld against Sri Lanka.

Some Sri Lanka bonds, especially those issued before 2015 have ‘single series’ collective action clauses which allow one bond holder with a large position to hold out and sue for full payment.

Hamilton Reserve had built up a 250 million US dollar ‘blocking minority in a July 2022 bond which is part of a debt suspension.

Later, bonds have aggregate collection action clauses which require a large position to be held in all bonds making, holdouts more difficult.

Bonds with collective action clauses allow a large majority of bondholders to accept a settlement which is binding on all.

Sri Lanka has 12.6 billion US dollars of bonds.

Sri Lanka defaulted on foreign debt in April 2022 after seven years of aggressive macro-economic policy involving monetary and fiscal stimulus to close an ‘output gap’.

Sri Lanka has hired Clifford Chance and Lazard as legal and financial advisors to restructure its foreign debt.

The Clifford Chance team is being headed by London-based partner, Deborah Zandstra, who has advised Argentina, the legal news portal law.com has reported said.

Other bondholders have formed a steering committee made up of Amundi Asset Management, BlackRock Eaton Vance Management, Grantham, Mayo, Van Otterloo & Co. LLC, HBK Capital Management, Morgan Stanley Investment Management, Neuberger Berman, T. Rowe Price Associates Inc, and Wellington Management, legal advisors White and Case LLC said in a statement.

Rothschild & Co is the financial advisor for the group.

The bondholders said they welcomed the “ongoing engagement with the International Monetary Fund (the “IMF”) and encouraged the authorities to formulate and implement a package of meaningful reforms and fiscal adjustments to restore the conditions for sustainable and inclusive growth and support the long term prosperity of Sri Lanka.”

“The Group is ready to interact swiftly with the authorities and the IMF to help achieve a timely resolution of Sri Lanka’s debt-related challenges.

“To this end, the Group expects that the forthcoming process will be conducted in a manner consistent with the G20-endorsed Principles for Stable Capital Flows and Fair Debt Restructuring, which emphasise transparency, good faith negotiations and fair treatment among creditor classes.” (Colombo/June22/2022)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka to address SME tax problems at first opportunity: State Minister

ECONOMYNEXT – Problems faced by Sri Lanka’s small and medium enterprises from recent tax changes will be addressed at the first opportunity, State Minister for Finance Ranjith Siyambalapitiya said.

Business chambers had raised questions about hikes in Value Added Tax, Corporate Income Tax and the Social Security Contribution Levy (SSCL) that’s been imposed.

It should be explored on how to amend the Inland Revenue Act, Siyamabalapitiya said, adding that the future months should be considered as a period where the country is being stabilized.

Both the VAT and SSCL are effectively paid by customers, but the SSCL is a cascading tax that makes running businesses difficult.

In Sri Lanka SMEs make up a large part of the economy, accounting for 80 per cent of all businesses according to according to the island’s National Human Resources and Employment Policy.

(Colombo/ Feb 05/2023)

Continue Reading

Sri Lanka revenues Rs158.7bn in Jan 2023 up 51-pct

ECONOMYNEXT – Sri Lanka’s government revenues were 158.7 billion rupees in January 2023 but expenditure and debt service remained high, Cabinet spokesman Minister Bandula Gunawardana said.

In January 2022 total revenues were Rs104.5 billion according to central bank data.

Sri Lanka’s tax revenues have risen sharply amid an inflationary blow off which had boosted nominal GDP while President Ranil Wickremesinghe has also raised taxes.

Departing from a previous strategy advocated by the IMF expanding the state and not cutting expenses, called revenue based fiscal consolidation, he is attempting to do classical fiscal consolidation with spending restraint.

President Ranil Wickremesinghe has presented a note to cabinet requesting state expenditure to be controlled, Gunawardana told reporters.

State Salaries cost 87.4 billion rupees.

Pensions and income supplements (Samurdhi program) were29.5 billion rupees.

Other expenses were 10.8 billion rupees.

Capital spending was   21 billion rupees.

Debt service was 377.6 billion rupees for January which has to be done with borrowings from Treasury bills, bonds and a central bank provisional advance of 100 billion rupees, Gunawardana said.

Interest costs were not separately given. (Colombo/Feb05/2023)

Continue Reading

Sri Lanka’s Ceylon Tea prices down for second week

ECONOMYNEXT – Sri Lanka’s Ceylon Tea prices fell for the second week at an auction on January 31, with teas from all elevations seeing a decline, data showed.

“In retrospect, the decline in prices would be a price correction owing to the overall product quality and less interest from some key importers due to the arrival of cargo at destinations ahead of schedule,” Forbes and Walker tea brokers said.

The weekly sale average fell from 1475.79 rupees to 1465.40 rupees from a week ago, according to data from Ceylon Tea Brokers.

The tea prices are down for two weeks in a row.

High Growns

The High Grown sale average was down by 20.90 rupees to 1380.23 rupees, Ceylon Tea Brokers said.

High grown BOP and BOPF was down about 100 rupees.

“Ex-Estate offerings which totalled 0.75 M/Kg saw a slight decline in quality over the previous week” Forbes and Walker said.

OP/OPA’s in general were steady to marginally down.

Low Growns

In Low Grown Teas, FBOP 1 was down by 100 rupees and FBOP was down by 50 rupees while PEK was up by 150 rupees.

The Low Growns sale average was down by 8.55 rupees to 1547.93 rupees.

A few select Best BOP1s along with Below Best varieties maintained.

OP1                     Select Best OP1’s were steady, whilst improved/clean Below Best varieties maintained.   Others and poorer sorts were easier.

PEKOE                 Well- made PEK/PEK1s in general were steady, whilst others and poorer sorts were down.

Leafy and Semi Leafy catalogues met with fair demand,” Forbes and Walker brokers said.

“However, the Small Leaf and Premium catalogues continued to decline.

“Shippers to Iran were very selective, whilst shippers to Türkiye and Russia were fairly active.”

This week  2.2 million Kilograms of Low Growns were sold.

Medium Growns

Medium Grown BOP and BOPF fell by around 100 rupees

The Medium Growns sale average was down by 33.40 rupees to 1199.4 rupees.

“Medium CTC teas in the higher price bracket witnessed a similar trend, whilst teas at the lower end were somewhat maintained subject to quality,” Forbes and Walker brokers said.

“Improved activity from the local trade and perhaps South Africa helped to stabilize prices to some extent.”

OP/OPA grades were steady while PEKOE/PEKOE1 were firm, while some gained 50-100 rupees at times.

Well-made FBOP/FBOPF1’s were down by 50-100 rupees per kg and more at times.

(Colombo/Feb 5/2023)

Continue Reading