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Sri Lanka offers fresh debt plan to bondholders amid Hamilton case extension hopes

Sri Lanka has proposed a revised restructuring plan to its sovereign bondholders as it aims to finalize debt restructuring by mid-year, amidst a lawsuit from holdout investor Hamilton Reserve seeking bond payment enforcement. The U.S. court granted a six-month stay on the case, with the deadline expiring on February 29. Sri Lanka may request an extension of at least three months to complete the restructuring process. The country is also close to signing agreements with the Paris Club creditor nations. Sri Lanka declined a bondholder proposal for a GDP-linked bond with a 20% haircut, which could increase if GDP growth underperforms IMF forecasts. Bondholders, skeptical of the IMF's pessimistic growth projections, prefer the suggested structure but might find it challenging to accept a simpler solution. Additionally, they oppose a value recovery instrument that is separate from the bond and not index-eligible, expressing dissatisfaction with the slow progress in negotiations and the initial restructuring terms proposed by Sri Lanka compared to those from bilateral creditors.

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