Sri Lanka was sued in the U.S. 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, Bloomberg News reported. 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. The bank’s holding represents more than 25% of the aggregate amount of the bonds, which, per the indenture, would likely enable it to block an undesired modification to the notes. 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.
