About 250 million dollars of Sri Lanka sovereign bonds which are under litigation has been excluded from a most favoured creditor clause in newly restructured bonds, according to International Monetary Fund program documents.
A most favoured creditor clause refers to the right of all creditors to receive the same treatment if any creditor is given special benefits.
“The litigation entails risk to debt sustainability,” the IMF report said. “However, the risk is contained given the limited size of bonds under the litigation and the design of most favored creditor clauses on the new bonds: it does not apply to payment of any judgment which is final and non-appealable.
Hamilton Reserve Bank, an investor which has 250 million dollars of an older bond which has a so-called single series collective action close went to court after acquiring a 25 percent holding.
Sri Lanka has restructured most of the larger creditors by the time of the last review earlier this month. Small amounts of commercial debt below 50 million dollars remained to be restructured.
Sri Lanka has also appointed advisors to restructure SriLankan Airlines 175 million dollars government guaranteed bonds.