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Restructuring Guru Buchheit Warns Sri Lanka on Holdout Creditors
A clause on some of Sri Lanka’s older dollar bonds gives creditors a potential opening to hold the sovereign hostage and stall restructuring negotiations, Lee Buchheit, a veteran of over two dozen debt restructurings who has also been consulted by the Sri Lankan government, told Bloomberg on Thursday.
He says some of the nation’s debt contracts contain the so-called single series collective action clause, which could allow a minority of bondholders to veto or demand terms in the negotiations.
“One must always anticipate the possibility of holdout creditors in an operation of this kind,” Buchheit said in email replies. “No one seriously doubts that Sri Lanka needs debt relief. The debate may focus on how much debt relief and from whom will it be sought.”
While Sri Lanka is seeking a bailout from the International Monetary Fund, the multilateral lender insists that existing debt must be brought to sustainable levels before any aid is doled out. That could include protracted discussions with not just global asset managers but also large bilateral creditors such as Japan, India and China, each of whom would also impose their conditions.
For instance, India has stated that it wants China to be treated on par with other creditors in the debt restructuring process. However, China has historically preferred to hand out fresh loans as refinance rather than rework existing debt and doesn’t often share details of the credit. Sri Lanka hasn’t been able to tap a $1.5 billion swap line from China over concern that the IMF may consider it as a loan and force delays in repayment.
‘Main Challenge’
“The main challenge I see is one of coordination among the three main creditor groups — bondholders, Paris Club bilaterals and non-Paris Club bilaterals like China and India,” said Buchheit. “A commitment by Sri Lanka to even-handed treatment of these three groups should go a long way toward smoothing the path of the negotiations.”
China has indicated that it will not insist on preferential repayment of loans and is willing to be treated at par with other creditors, Sri Lanka’s President Gotabaya Rajapaksa said in an interview on Monday.When asked if Beijing would be willing to be treated on par with other creditors, Foreign Ministry spokesman Zhao Lijian said on Tuesday that China supports “the proper settlement through consultation with relevant parties and institutions” and hopes other countries will also play a constructive role.
“We hope that Sri Lanka will protect the legitimate rights of foreign investors and safeguard and uphold the credibility and good investment environment at home,” he added.
Sri Lanka is grappling with a worsening humanitarian crisis after it ran out of dollars to import food and fuel, stoking inflation to 40% and forcing a historic debt default. Sri Lanka needs $5 billion to ensure “daily lives are not disrupted,” and a further $1 billion to strengthen the rupee, Prime Minister Ranil Wickremesinghe told Parliament Tuesday.The first step would be a Debt Sustainability Analysis from the IMF, which will provide an outline of how much of a haircut creditors could see. Unlike corporate bankruptcies, debt restructuring has no clear, defined rules.
That’s where Buchheit fits in. The retired lawyer has worked on almost every major sovereign restructuring case in a career that spanned over four decades, including leading the legal team for the $206 billion Greek negotiations in 2012. That restructuring — the world’s biggest — retroactively imposed an “aggregated collective action clause” across domestic notes, which has since become an important tool to ensure that a majority of creditors can force any minority holdouts to accept a restructuring deal.Bonds issued before 2015 are likely to be subject to the problematic single-series CACs as innovations after that year have eliminated more protracted negotiations by requiring only investors who hold three quarters of overall debt to agree, according to Matthew Vogel, London-based portfolio manager and head of sovereign research at FIM Partners.
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Lankan aircrew fly daring UN Medevac in hostile conditions in Africa
The Sri Lanka Aviation Unit operating under the United Nations (UN) mandate in the Central African Republic (CAR) has successfully carried out a critical Casualty Evacuation (CASEVAC) mission, under extremely hostile and volatile conditions.
The mission had been launched in response to an urgent request to evacuate two United Nations personnel who had sustained combat-related injuries in the Zemio area, the Sri Lanka Air Force (SLAF) said.
Accordingly, the evacuation has been conducted using a Mi-17 helicopter (UNO 325P).
The aircraft was captained by Wing Commander Nelson De Silva, with Flight
Lieutenant Arunoda Ekanayake serving as co-pilot.
The aircrew comprised Squadron Leader Sandeepa Wijayathunga, Sergeant WCN Senevirathne, and Corporal DVPM Rodrigo. The Aeromedical Evacuation Team included Group Captain Sujith Perera, Flight Sergeant KW Sumedha, and Flight Sergeant RDH Karunadasa, who provided critical in-flight medical care to the casualties, the SLAF stated.
The extraction site was located approximately 20 kilometres northeast of the Zemio Permanent Operating Base (POB) and posed significant operational challenges.
They included extremely dusty landing conditions, an unstable and rapidly evolving tactical environment, and the requirement for a precision landing under constant threat, the SLAF said.
Despite these constraints, the aircrew demonstrated remarkable courage, sound judgement, and outstanding airmanship throughout the operation.
A comprehensive threat assessment conducted by the aircraft commander, taking into account the critical condition of the casualties, reflected exceptional adaptability and operational decision-making, the statement added.
According to the SLAF, the total flight duration of the mission was one hour and 45 minutes. The injured personnel were safely evacuated from the hostile location and successfully transported to Bangui for advanced medical treatment.
News
Lanka to observe National Safety Day today
Sri Lanka will mark National Safety Day today (26) with countrywide religious observances, a national moment of silence and the main state commemoration at the Peraliya Tsunami Memorial in Galle, officials said yesterday.
The annual observance, declared in the aftermath of the 2004 Indian Ocean tsunami that claimed over 35,000 lives and left more than 5,000 people missing, is held each year to honour victims of the tsunami and other disasters, while reinforcing public awareness on disaster preparedness.
Disaster Management Centre (DMC) Director General Retired Major General Sudantha Ranasinghe said the 2025 programme would be conducted with due consideration to prevailing weather conditions caused by the Ditwah cyclone, with district-level multi-religious observances planned across the country.
“National Safety Day is a moment of remembrance and reflection. It also reminds us of the importance of preparedness, early warning and community resilience,” he said.
The main national commemoration will take place at the Peraliya Tsunami Memorial from 8.30 a.m. to 11.00 a.m., with the participation of government representatives, religious leaders, disaster survivors and families of victims.
Secretary to the Ministry of Defence Air Vice Marshal (Retd) Sampath Thuyacontha said a two-minute silence will be observed nationwide from 9.25 am to 9.27 am today, in memory of all those who lost their lives to the tsunami and other disasters.
“All institutions and members of the public are requested to observe this moment of silence as a mark of respect and national solidarity,” he said.
DMC Additional Director General Pradeep Kodippili urged the media to provide wide coverage to the main commemoration in Galle as well as district-level programmes organised through District Secretariats.
“Media support and public participation are essential to ensure that the lessons of past disasters remain alive and that a culture of safety is strengthened across the country,” Kodippili said.
National Safety Day has been observed annually on December 26 since 2005.
By Ifham Nizam ✍️
News
Street vendors banned from Kandy City
All forms of street vending within the Kandy Municipal Council area will be banned from January 1, Mayor Chandrasiri Wijenayake has said.The Kandy Mayor said the decision had been taken as part of efforts to preserve it as a clean and aesthetically pleasing city and to allow the public to move freely while enjoying its surroundings.
He said the ban would apply not only to streets in the city centre but across the entire municipal council area. The move, he added, follows long-standing public requests for a more systematic regulatory framework within the Kandy urban area and is aimed at ensuring public convenience and welfare.
Wijenayake stressed that the decision would be implemented without reversal.
The Kandy Municipal Council has already issued formal notices to pavement vendors directing them to cease operations. Street vendors had requested a three-month grace period to relocate, which will expire on December 31.
By S. K. Samaranayake ✍️
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