Govt. chooses Lazard and Clifford Chance as advisers for the restructuring of the foreign debt

  • Rothschild & Co. acting as financial advisor to the group of creditors and White & Case LLP as legal advisor

The government selected the Institut Lazard of France to advise on the external debt restructuring program and the Institut Clifford Chance LLP for the necessary legal expertise based on their submitted technical and financial offers.

The selection process for International Financial Advisory Services and International Legal Advisory Services attracted 28 and 23 Expressions of Interest (EOI) respectively.

The two winning parties were recommended by Cabinet-appointed steering committees. The cost of the financial advisory service was announced yesterday at $5.6 million by Cabinet Spokesperson, Minister Bandula Gunawardena.

Central Bank Governor Dr Nandalal Weerasinghe told a forum hosted by the Press Institute on Monday that the committee had successfully negotiated lower costs.

Bloomberg recently reported that Rothschild & Co. was acting as financial advisor to the creditor group and White & Case LLP was its legal advisor.

The crucial Cabinet approval was highly sought after as Sri Lanka lost time due to political instability since early May. The initial plan was to finalize the selection within two weeks of the closing of the EOIs initially on April 16 and later on April 22.

CBSL Governor Dr Weerasinghe said the debt restructuring will take around six months.

On April 12, Sri Lanka announced a preemptive negotiated default on all external debt from that date after realizing the situation was unsustainable. At the end of 2021, Sri Lanka’s external debt stood at 51 billion dollars while this figure has probably exploded following the sharp depreciation of 40% of the rupee.

The bulk (35%) of external debt is made up of expensive international sovereign bonds, while the rest is held by what the CBSL governor described as Paris Club members (including Japan, the United United States, Germany) and non-Paris Club creditors (including China and India). The exact component of the debt to be restructured has not yet been quantified.

The scope of activity of the financial adviser includes: assessing the stock of debt by maintaining sound macroeconomic fundamentals, advising the government on debt management strategies and facilitating the execution of these strategies; assess the current budget position and highlight key areas to focus on in the negotiations; design a mechanism and processes to achieve economic and political objectives in pursuit of debt management and reform and design a mechanism to engage with the IMF to best achieve the government’s required fiscal targets.

The Financial Advisor should help improve medium- and long-term debt management and reform strategies based on sound analysis consistent with macroeconomic assumptions; recommend a strategy to obtain the best possible results in negotiations with the IMF and government creditors; negotiate and represent the government’s interests in meetings with creditors; work in consultation with legal advisors and relevant agencies/stakeholders; any other task entrusted in connection with the management and reform and debt reform and the achievement of the objectives of the Government.

The legal consultant is expected to advise the government on debt management strategies and facilitate the execution of these strategies in consultation with relevant stakeholders; examine legal and regulatory issues on debt management while highlighting key areas to focus on in negotiations; prepare relevant documents to give effect to debt management strategies; negotiate and represent the government’s interests in meetings with creditors.

In addition, the legal consultant should recommend strategies for engaging with official development agencies in relation to possible development assistance during the process of discussion and consensus building with private creditors and official bilateral creditors. on a possible reprofiling of the public debt; work in consultation with financial advisors and relevant agencies/stakeholders; preparing all legal documents and establishing and expediting all relevant matters in a timely manner and reviewing timelines proposed by financial advisors and relevant agencies/stakeholders.

Shirlene J. Manley