Baker McKenzie acted as the legal advisor to a consortium of local institutional holders (“LCSL”) of the international sovereign bonds issued by the Government of the Democratic Socialist Republic of Sri Lanka, with an aggregate principal exceeding USD12.5 billion.
The landmark restructuring deal marks a significant milestone in addressing Sri Lanka’s sovereign debt challenges and creates a foundation for sustainable economic recovery.
Through an intensive 30-month negotiation period, Baker McKenzie’s cross-border team worked closely with the consortium of LCSL to facilitate productive discussions with the Sri Lankan authorities while engaging with other major international investors (“Ad Hoc Group”) to develop a comprehensive joint solution that balances debt sustainability while ensuring equitable bondholder treatment. The LCSL and Ad Hoc Group members collectively represented over 50% of Sri Lanka’s outstanding sovereign bonds.
The key pillars of the restructuring deal include the use of Macro-Linked Bonds (MLBs) and Governance-Linked Bonds (GLBs), with returns tied to Sri Lanka’s economic performance and governance improvements, respectively. The International Monetary Fund (IMF) has confirmed that the restructuring terms are aligned with the debt targets and other key parameters of Sri Lanka’s IMF-supported program, while Sri Lanka’s Official Creditor Committee has verified their compliance with the comparability of treatment principle.
The transaction was led by Banking & Finance Principal Emmanuel Hadjidakis (Singapore), who was supported by Banking & Finance Partner James Tanner (London) and Banking & Finance Associate Lim Yin Li (Singapore).
Commenting on the deal, Emmanuel said: “We are proud to have played a key role in this groundbreaking restructuring deal that delivers critical debt relief while establishing a sustainable framework for Sri Lanka’s external debt management. The deal demonstrates how innovative financial solutions can support economic renewal while balancing the interests of both private and public stakeholders.”
