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Earlier this year, Alphaville contributors Mark Weidemaier and Mitu Gulati provided insights into Hamilton Reserve Bank’s lawsuit against Sri Lanka regarding a defaulted 2022 bond. It has now come to light that the US government is seeking to intervene.
Damian Williams, the US Attorney for the Southern District of New York, responsible for NY law bonds, has written a letter to Judge Denise Cote, who is overseeing the case.
We are grateful to Mitu for bringing this intriguing development to our attention. Here are the key points of the letter:
Dear Judge Cote:
I am writing to inform the Court of the United States of America’s potential involvement in the Hamilton Reserve Bank, Ltd. vs. Democratic Socialist Republic of Sri Lanka lawsuit. This lawsuit involves $250,190,000 of defaulted sovereign bonds. Sri Lanka has filed a motion to stay the litigation for six months while it negotiates sovereign debt restructuring with creditors. The United States is actively considering whether to file a Statement of Interest regarding the pending motion. We expect to inform the Court of our potential participation and file our Statement of Interest by October 2, 2023. We respectfully request that the Court delay its decision on the motion until we can submit our statement.
Thank you for considering our request.
Damian Williams
United States Attorney
Southern District of New York
To learn more about this case, you can refer to Mark and Mitu’s previous Alphaville post. In summary, Hamilton Bank, based in St Kitts, holds a $250mn stake in Sri Lanka’s $1bn 2022 bond, giving it the power to prevent a restructuring. The bank has taken an unusually aggressive approach as a “holdout” creditor, potentially interfering with the restructuring process. The US government seems to object to this. They also mentioned that other official creditors might express their views separately, but the SDNY intends to address the interest of the United States explicitly.
It is intriguing to consider why the US government has an interest in Sri Lanka’s debt restructuring and why they feel the need to make their views known to the court. It may be a strategy to delay Hamilton Bank’s legal action and facilitate a more restructuring-friendly solution for Sri Lanka. We will monitor the docket to see how the SDNY ultimately responds.
In the meantime, if you want more insights into this case, you can listen to Mark and Mitu discussing it on their podcast, Clauses & Controversies.
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