Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.

Thank You

Join the forum, it's quick and easy

Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.

Thank You
Would you like to react to this message? Create an account in a few clicks or log in to continue.

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka

Click Link to get instant AI answers to all business queries.
Click Link to find latest Economic Outlook of Sri Lanka
Click Link to view latest Research and Analysis of the key Sectors and Industries of Sri Lanka
Worried about Paying Taxes? Click Link to find answers to all your Tax related matters
Do you have a legal issues? Find instant answers to all Sri Lanka Legal queries. Click Link
Latest images

Latest topics

» LOLC Group's stunning performance goes beyond numbers!
by Riz123 Yesterday at 1:19 pm

» Will CEYLON TOBACCO COMPANY PLC (CTC.N0000) delist from the CSE?
by rajithasahan Yesterday at 10:40 am

by ErangaDS Sun Mar 03, 2024 10:30 am

» CSE ready for another Downtrend?
by D.G.Dayaratne Sat Mar 02, 2024 9:25 pm

» EXPO.N - Expo Lanka Holdings De-Listing
by smallinvestor Fri Mar 01, 2024 4:50 pm

» ලොව වැඩිම පොලී ගෙවන රට බවට ශ්‍රි ලංකාව පත් වෙයි
by Beyondsenses Fri Mar 01, 2024 3:43 pm

» Suspension of Parate Execution: Impact to Banking Sector Shares
by God Father Fri Mar 01, 2024 7:15 am

» TAFL is the most undervalued & highly potential counter in the Poultry Sector
by atdeane Thu Feb 29, 2024 10:33 pm

» Excellent Report pending From CTC (Keep eye on CTC )
by ddrperera Thu Feb 29, 2024 7:11 pm

» Ceylon cold stores
by Beyondsenses Thu Feb 29, 2024 11:21 am

» Investor Alert: Sri Lanka Stock Brokering Mafia Strongly Active!
by D.G.Dayaratne Thu Feb 29, 2024 6:29 am

by D.G.Dayaratne Wed Feb 28, 2024 9:39 pm

» What are the key aspects of the Online Safety Act?
by God Father Tue Feb 27, 2024 10:35 pm

» How to defeat Ranil Wickramasinghe at the next Presidential Elections
by empire Sat Feb 24, 2024 10:34 am

by ApolloCSE Sat Feb 24, 2024 1:35 am

» Why Foreign Sales have gone up during last few days
by D.G.Dayaratne Fri Feb 23, 2024 10:21 am

» Market Performance (2022-2024)
by D.G.Dayaratne Fri Feb 23, 2024 6:10 am

» Richard Pieris Exports PLC (REXP.N0000) future looks bleak!
by God Father Wed Feb 21, 2024 3:34 pm

» ANALYSIS: Sri Lanka Car Market 2024
by D.G.Dayaratne Mon Feb 19, 2024 11:14 am

» RED ALERT!! from Richard Pieris and Company PLC
by ChooBoy Sun Feb 18, 2024 10:28 pm

» Sri Lanka: China EXIM Bank Debt Moratorium to End in 2024
by God Father Sun Feb 18, 2024 8:29 am

» IPO Failures in Sri Lanka
by God Father Sun Feb 18, 2024 8:21 am

by ErangaDS Sat Feb 17, 2024 9:57 pm

» Treasury Bill is an option of Fixed income
by ResearchMan Sat Feb 17, 2024 2:31 pm

by Gaudente Thu Feb 15, 2024 7:40 pm


Submit Post
ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post


Send your suggestions and comments

* - required fields







The information contained in this FINANCIAL CHRONICLE™ have been submitted by third parties directly without any verification by us. The information available in this forum is not researched or purported to be complete description of the subject matter referred to herein. We do not under any circumstances whatsoever guarantee the accuracy and completeness information contained herein. FINANCIAL CHRONICLE™ its blogs, forums, domains, subdomains and/or its affiliates and/or its web masters, administrators or moderators shall not in any way be responsible or liable for loss or damage which any person or party may sustain or incur by relying on the contents of this report and acting directly or indirectly in any manner whatsoever. Trading or investing in stocks & commodities is a high risk activity. Any action you choose to take in the markets is totally your own responsibility, FINANCIAL CHRONICLE™ blogs, forums, domains, subdomains and/or its affiliates and/or its web masters, administrators or moderators shall not be liable for any, direct or indirect, consequential or incidental damages or loss arising out of the use of this information. The information on this website is neither an offer to sell nor solicitation to buy any of the securities mentioned herein. The writers may or may not be trading in the securities mentioned.

Further the writers and users shall not induce or attempt to induce another person to trade in securities using this platform (a) by making or publishing any statement or by making any forecast that he knows to be misleading, false or deceptive; (b) by any dishonest concealment of material facts; (c) by the reckless making or publishing, dishonestly or otherwise of any statement or forecast that is misleading, false or deceptive; or (d) by recording or storing in, or by means of, any mechanical, electronic or other device, information that he knows to be false or misleading in a material particular. Any action writers and users take in respect of (a),(b),(c) and (d) above shall be their own responsibility, FINANCIAL CHRONICLE™ its blogs, forums, domains, subdomains and/or its affiliates and/or its web masters, administrators or moderators shall not be liable for any, direct or indirect, consequential or incidental violation of securities laws of any country, damages or loss arising out of the use of this information.

AI Live Chat

You are not connected. Please login or register

Debt Crisis: Sri Lanka Vs Argentine

Go down  Message [Page 1 of 1]

1Debt Crisis: Sri Lanka Vs Argentine Empty Debt Crisis: Sri Lanka Vs Argentine Thu Jun 23, 2022 8:17 am



Debt Crisis: Sri Lanka Vs Argentine Image_8f0086abe1

Sri Lanka was sued in the US by a bondholder after the South Asian nation defaulted on its debt for the first time in history while struggling to stop an economic meltdown.

Hamilton Reserve Bank Ltd., which holds more than $250 million of Sri Lanka’s 5.875% International Sovereign Bonds due July 25, filed the suit Tuesday in a New York federal court seeking full payment of principal and interest.

Sri Lanka, an island nation off the southern tip of India, fell into default in May after the expiry of a 30-day grace period for missed interest payments on two of its sovereign bonds. It was the first sovereign debt default by the country since it gained independence from Britain in 1948.

Hamilton Reserve, based in St. Kitts & Nevis, said in the lawsuit that the default is being “orchestrated by officials at the highest levels of government,” including the ruling Rajapaksa family, and accused Sri Lanka of excluding bonds held by domestic banks and other interested parties from an announced debt restructuring.

“As a result, these favored Sri Lankan parties stand to be paid principal and interest in full, while the Bonds — which are also broadly held by US retirement systems including Fidelity Investments, BlackRock, T. Rowe Price, Lord Abbett, JPMorgan, PIMCO, Neuberger Berman and other US investors — remain indefinitely in default and unpaid, causing American retirees tremendous suffering from potentially massive losses of up to 80% of their original investment value,” lawyers for Hamilton Reserve said in their complaint.

A group of Sri Lanka’s largest creditors, including Pacific Investment Management Co., T. Rowe Price Group Inc. and BlackRock Inc., has been set up and restructuring talks are expected to start soon, Bloomberg reported, citing people familiar with the arrangement who requested anonymity ahead of a formal announcement.

What happened when Argentina defaulted on its debt?

Around 1998 to 2002, Argentina's economy went into severe recession. On December 26, 2001, Argentina defaulted on a total of US$93 billion of its external debt; of around $81.8 billion in bonds that were defaulted, 51% were issued during this three-year period.

How much debt is the Argentina in?
The agreement, reached by consensus according to two sources, marks the 22nd IMF program for Argentina and comes after more than a year of negotiations. It replaces a failed $57 billion program from 2018, for which Argentina still owes over $40 billion. About $9.66 billion will be disbursed immediately, the fund said.

How much sovereign debt did Argentina default on?
When Argentina defaulted on more than $80 billion of debt in 2001, it led to years of litigation and legal cases taken by several disgruntled bondholders. Some roots of the present crisis can be found there.

When did Argentina pays off debt to the International Monetary Fund?
Over the past 63 years, Argentina has frequently used the resources of the IMF and holds the record for the largest loan distributed, reaching nearly $57 billion in 2018. However, in 2006 under the leadership of Néstor Kirchner, Argentina was able to pay off its debts, thus escaping Article IV IMF surveillance.

How did the IMF help Argentina?
The authorities' IMF-supported program, which was recently approved by the Argentine National Congress, aims to strengthen public finances and start reducing persistently high inflation through a multi-pronged strategy involving a gradual elimination of monetary financing of the fiscal deficit and an enhanced monetary.

Did Argentina default on the IMF?
The country faces some $17.5 billion of payments under the 2018 agreement this year which it cannot pay. "The agreement was necessary in order not to default with the IMF," said economist Roberto Geretto of Fundcorp.

Argentina Debt Restructuring offer
Argentina made a debt-restructuring offer, establishing a dialogue with creditors to ensure Argentina's long-term sustainability. The offer included a 3-year grace period, a 5.5% reduction on the bonds' principal, and a 62% reduction of interest payments.

Why did IMF fail in Argentina?
In essence, they state the IMF bailout was not fit for purpose. The report admits that the strategy was “too fragile to deal with such a high-risk scenario”. In other words, the IMF not only failed to take appropriate account of the range and complexity of Argentina's problems

Which countries have defaulted on their debt?
Ukraine defaulted on its loans in 1998 and 2020. Between 2017 and 2018, the Latin American country Venezuela defaulted on its loans worth $60 billion. Greece defaulted on its debt twice in 2015 worth $1.7 billion and 456 million euros, respectively. Ecuador defaulted on its debt in 2008 and 2020

What Happened in Argentina

Upon default, Argentina's bondholders sued to be repaid 100% of their bonds' face value. Among the bondholders were vulture funds, who had speculatively acquired US$1.3 billion of the bonds' total value on the secondary market for cents on the dollar after the 2001 default. Vulture funds also owned a large quantity of credit default swaps (CDS) against Argentine bonds. This created a further incentive to not only trigger a default against Argentina; but also to undermine the value of the bonds themselves, as the CDS would pay out at a higher rate if the defaulted bonds decline to extremely low values.

The vulture funds held out for payment in full via litigation (hence their common description as "holdout" bondholders, or "holdouts"). Their legal tactics included seeking injunctions to attach future payments to other bondholders by way of forcing Argentina to settle. A similar strategy had been successfully pursued previously by vulture funds against Peru and a number of African nations, as well as against corporations in the United States itself, such as Delphi Automotive, which was forced to pay Paul Singer's Elliott Management Corporation a return of over 3,000% on corporate bonds defaulted during the 2008 recession.NML Capital Limited, the Cayman Islands-based principal vulture funds in this dispute, is also owned by Singer. NML paid $49 million in the secondary market for bonds worth $832 million by 2014. Its lobbying group, American Task Force Argentina, is the most prominent and best financed opponent of Argentine bond restructuring efforts, spending over $7 million lobbying U.S. Congressmen and becoming the top campaign contributor to a number of these; the most prominent, former Western Hemisphere Subcommittee Chair Connie Mack IV (R-FL), became the main sponsor of a bill in 2012 designed to force Argentina to pay NML nearly $2 billion before losing his Senate bid that year. Their lobbying campaign also extends to Argentina, where NML Capital finances an NGO led by Laura Alonso, a Congresswoman affiliated with the right-wing PRO party.

In August 2013, the Government of Argentina lost a U.S. appeals court case and was told it had to repay the full face value amount to these holdouts. Courts in Europe have backed Argentina on the basis of the equal terms clause, however. A third debt restructuring offer to remaining holdouts on similar terms to the 2010 swap was announced on August 27, 2013. However, meeting vulture funds' full face-value demands is problematic for Argentina, because although bonds held by vulture funds are a small share of the total (1.6%), such a settlement would lead to lawsuits from other bondholders demanding to be paid on similar terms under the agreement's "rights upon future offers" (RUFO) clause, effectively unwinding the settlement by allowing all bondholders payment in full, and creating an unaffordable liability of up to $120 billion more than at present.

As a result, Argentina has still not been able to raise finance on the international debt markets for fear that any money raised would be impounded by holdout lawsuits; their country risk borrowing cost premiums remain over 10%, much higher than comparable countries. Consequently, Argentina has been paying debt from central bank reserves, has banned most retail purchases of dollars, limited imports, and ordered companies to repatriate money held abroad. Nevertheless, between 2003 and 2012 Argentina met debt service payments totaling $173.7 billion, of which 81.5 billion was collected by bondholders, 51.2 billion by multilateral lenders such as the IMF and World Bank, and 41 billion by Argentine government agencies. Public external debt denominated in foreign currencies (mainly in dollars and euros) accordingly fell from 150% of GDP in 2002 to 8.3% in 2013.

Debt Restructuring in Argentina

he Argentine debt restructuring is a process of debt restructuring by Argentina that began on January 14, 2005, and allowed it to resume payment on 76% of the US$82 billion in sovereign bonds that defaulted in 2001 at the depth of the worst economic crisis in the nation's history. A second debt restructuring in 2010 brought the percentage of bonds under some form of repayment to 93%, though ongoing disputes with holdouts remained. Bondholders who participated in the restructuring settled for repayments of around 30% of face value and deferred payment terms, and began to be paid punctually; the value of their nearly worthless bonds also began to rise. The remaining 7% of bondholders were later repaid in full, after centre-right and US-aligned leader Mauricio Macri came to power in 2015.

As part of the restructuring process, Argentina drafted agreements in which repayments would be handled through a New York corporation and governed by United States law. The holdout bondholders found themselves unable to seize Argentine sovereign assets in settlement,[7] but realized that Argentina had omitted to provide for holdout situations and had instead deemed all bonds repayable on pari passu (equal) terms that prevented preferential treatment among bondholders. The holdout bondholders therefore sought, and won, an injunction in 2012 that prohibited Argentina from repaying the 93% of bonds that had been renegotiated, unless they simultaneously paid the 7% holdouts their full amount due as well. Together with the agreement's rights upon future offers ("RUFO") clause, this created a deadlock in which the 93% of renegotiated bondholders could not be paid without paying the 7% holdouts, but any payment to the holdouts would potentially (according to Argentina) trigger the 93% being due repayment at full value too; a sum of around $100 billion that Argentina could not afford.[8] The courts ruled that as Argentina had itself drafted the agreement, and chosen the terms it wished to propose, it could not now claim the terms were unreasonable or unfair, and that this could not be worked around by asserting sovereign status since the injunction did not affect sovereign assets, but simply ruled that Argentina must not give preferential treatment of any group of bondholders over any other group when making repayments.

Subsequently, though Argentina wanted to repay some creditors, the judgment prevented Argentina from doing so, because being forced to repay all creditors, including the holdouts, would have totaled around $100 billion. The country was therefore categorized as being in selective default by Standard & Poor's and in restricted default by Fitch. The ruling affected New York law Argentine bonds; Argentine bonds issued under Buenos Aires and European law were not affected.

Proposed solutions include seeking waivers of the RUFO clause from bondholders, or waiting for the RUFO clause to expire at the end of 2014. The dilemma raised concerns internationally about the ability of a small minority to forestall an otherwise-agreed debt restructuring of an insolvent country,] and the ruling that led to it was criticized.

Although the media widely reported that the default ended with payments to the principal bondholders in early 2016, during the presidency of Mauricio Macri, several hundred million dollars in outstanding defaulted bonds remained unpaid, which resulted in continuation of litigation. In November 2016 Argentina announced that it had settled with additional creditors for US$475 million.[

Argentina defaulted again on May 22, 2020 by failing to pay $500 million on its due date to its creditors. Negotiations for the restructuring of $66 billion of its debt continue.

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum