Tuesday, July 5, 2022

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Govt hires Lazard and Clifford Chance for debt restructuring

The Central Bank has selected renowned financial and legal advisers Lazard and Clifford Chance to negotiate with multiple creditors of Sri Lanka as it prepares for the difficult task of renegotiating its debts,

Cabinet of Ministers has given its approval to hire this firm by saying massive fee of US$ 5 -6 million at a time of severe dollar crisis as the country needs to restructure its massive debt of $ 6.9 billion this year and it he paid $ 500 million in January 2022

Sri Lanka’s 2022 debt service payments are 6,919 million dollars of which 2.72 billion US dollars are owed to domestic holders close to 40 percent of total payments.

has to pay 6,919 million US dollars in interest and capital payments of foreign currency debt in 2022 out of which 4,197 million was due to foreign holders.

About 2,722 million dollars are owed to domestic holders including in Sri Lanka Development Bonds, foreign currency banking unit borrowings and domestic holdings of international sovereign bonds.

Cabraal said a 500 million US dollar bond was repaid in January 18 and was also planning to repay a billion US dollar bond falling due in July 2022. In the January bond, 170 million was due to domestic holders. Bilateral and multilateral debt service was about 2.3 billion US dollars.

Sri Lanka has hired heavyweight financial and legal advisers Lazard and Clifford Chance as it prepares for the difficult task of renegotiating its debts, informed sources said. .

The move is the latest development in Sri Lanka’s worst economic crisis since independence from Britain in 1948 and comes after the country was officially declared in default for the first time ever last week after it halted debt payments.

Experts and economists have been waiting for the appointment as the country looks to restructure over $12 billion of overseas debt that had been building up for years but become unsustainable when COVID-19 hammered the economy.

A mix of loans from China, India and Japan, as well as all the bonds held by private investment funds, means long-resisted but now embraced talks with the International Monetary Fund (IMF) could be complex, especially if social unrest worsens, official sources said.

Other factors have included heavily subsidized domestic prices of fuel and a decision to ban the import of chemical fertilizers, which devastated the agriculture sector,they added..

A group of Sri Lanka’s largest sovereign dollar bondholders has hired Rothschild as its financial adviser and another legal firm, White & Case, as its legal adviser.

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