By: Staff Writer
March 26, Colombo (LNW): Plaintiff Hamilton Reserve Bank Ltd. (HRB), countering the defendant Democratic Socialist Republic of Sri Lanka’s motion for a five-month stay, has requested the New York Southern District Court to extend the stay till the end of April 2024 on the condition that timely and specific information about the status of restructuring be submitted by 16 April.
Sri Lanka was seeking a five-month hold on a lawsuit filed by a bondholder over the country’s historic debt default, telling a New York federal judge that it wants more time to negotiate with private creditors.
The island nation was sued in July 2022 by Hamilton Reserve Bank Ltd., which sought full payment on more than $250 million of Sri Lanka’s dollar bond that was due that month. The bank says it holds more than 25% of the bonds, which would likely enable it to block any modification of the notes.
Complete details about any restructuring proposal Sri Lanka made or received and the progress are the key contents of the proposed reports the Plaintiff demands.
In its ‘Memorandum of Law in Opposition to Defendant’s Motion for Further Stay,’ HRB argued a further five-month stay until the end of July 2024 is unwarranted. “
The traditional stay factors and comity do not support a five-month stay. The prior four-month stay has already afforded Sri Lanka a limited opportunity to achieve a consensual resolution before judgments are entered or enforced against its debts. Nothing more is required,” the Bank said.
Bringing out Peru’s restructuring, which took seven years as an example, the HRB pleaded: “Second Circuit law clearly states that bondholder actions cannot be kept indefinitely.
That is because sovereign debt restructurings, which involve ‘voluntary and open-ended negotiations’, are not the equivalent of a judicially enforced bankruptcy proceeding. Instead, sovereign debt restructurings are merely voluntary, private negotiations, with no judicial supervision or clear timeline, that typically take years.
Given such negotiations’ protracted and uncertain nature, courts should not deny bondholders’ right to enforce the underlying debt by making their rights conditional on the completion of restructuring.”
“Sri Lanka is pursuing private negotiations with other creditors that have ‘no obvious and reasonably proximate termination date,’ indeed, these negotiations remain at an early stage nearly two years after Sri Lanka’s default.
As in Peru, Plaintiff’s rights cannot be made conditional on the completion of Sri Lanka’s restructuring, since there is no assurance of whether or when that will occur.
