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Debt restructuring agreement awaiting AG’s approval 

12 Jun 2022

  • Treasury says ‘no timeline’; wants it ‘as early as possible’
  • Cabinet approves Lazard, Clifford Chance to restructure SL debt
By Tanya Shan  Sri Lanka’s restructuring process is yet to begin, with the agreement that the Government is expected to enter with debt restructuring firms Lazard and Clifford Chance still pending approval from the Attorney General’s Department, according to the Treasury.  Treasury Deputy Secretary R.M.S. Ratnayake told The Sunday Morning Business that Cabinet approval had already been given to the appointment of these firms and that the agreement would be entered into ‘as early as possible’ following the approval of the Attorney General’s Department.  Ratnayake did not have any details on the initial payments that would be made to these firms.  Debt advisors usually help clients find ways to repay debt affordably and provide advice on dealing with the impacts of debt. In simple terms, debt advisors help restructure debt.  Lazard is one of the debt advisors appointed by the Government to restructure its debt. Lazard Ltd. is a financial advisory and asset management firm that engages in investment banking, asset management, and other financial services, primarily with institutional clients. It is viewed as the world’s largest independent investment bank, headquartered in Bermuda, with principal executive offices in New York, Paris, and London.  Clifford Chance LLP is an international law firm headquartered in the UK and a member of the ‘Magic Circle’ – a group of London-based multinational law firms. It ranks as one of the top 10 largest law firms in the world measured both by the number of lawyers and revenue.  Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe two weeks ago stated that the process of debt restructuring was expected to take six to seven months. He said that during this period of debt restructuring, he expected Sri Lanka to face challenges due to the depleting reserves. “The challenge that we are facing here is over how we can live until the debt is restructured as Sri Lanka has a very small amount of reserves and it is not sufficient. This is where the economy will go through a contraction risk.” Dr. Weerasinghe stressed that this contraction risk that the country would go through would take place at the “highest rate” and would not have the freedom to import whatever it wanted, besides essentials.  According to economists, the sooner the restructuring works, the earlier Sri Lanka will be able to seek more loans as the country is considered bankrupt due to non-payment of the debt and absence of a restructured plan to make payments. According to them, when the restructuring happens, it will send a signal to capital markets that Sri Lanka is not bankrupt despite there being delays in payments.  


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