Sri Lanka: Hamilton Bank blocks debt restructuring
In the context of multiple crises, Sri Lanka had to suspend its repayments to foreign creditors in spring 2022. Since then, the Southeast Asian Island state has conducted various debt restructuring negotiations. In June 2024, Sri Lanka reached an agreement with the majority of its public creditors, including the German government.
Following extensive negotiations with the external holders of Sri Lankan government bonds, Sri Lanka also put the restructuring of these bonds to a vote at the end of November 2024: 11 bond series with a total volume of USD 12.55 billion were to be exchanged for new bonds. A bond exchange ist the typical means for restructuring bonds: New bonds are issued in exchange for the old bonds. The new bonds have adjusted conditions – such as lower interest or principal payments or longer repayment periods. This can contribute to (temporary) relief for the debtor state. However, the actual effect depends heavily on the specific conditions in the new bonds.