A group of overseas private creditors is ready to hold debt restructuring talks with Sri Lanka consistent with the International Monetary Fund's programme, their legal adviser said on Friday.

The group "stands ready to engage quickly and effectively with the Sri Lankan authorities to design and implement restructuring terms that would help Sri Lanka restore debt sustainability and allow the country to re-gain access to the international capital markets," the creditor's legal adviser said in a letter to the Washington-based lender.

Global investment companies Amundi Asset Management, BlackRock, HBK Capital Management, Morgan Stanley Investment Management and T. Rowe Price Associates Inc. are among the group of around 30 creditors.

The combination of the pandemic, which ruined the tourist sector, the Ukraine war, which drove up the price of imported fuel and food, and economic mismanagement pitched the Indian Ocean island of 22 million people into its worst financial crisis in more than seven decades. And having run out of foreign currency to pay for basic imports, Sri Lanka defaulted on its foreign debt in May.


The country secured a preliminary deal on a $2.9 billion extended fund facility with the IMF in September, though no funds have been disbursed yet because the bailout has to be approved by the Fund's executive board.

To unlock IMF's cash disbursements, the government first needs to secure financing assurances from key bilateral lenders such as Japan, India and China. While India committed to help ease the debt burden of neighbour as part of the IMF programme, China's EximBank only offered a two-year moratorium, a move that for the United States is not enough. The United States has the biggest share of IMF votes.

The Paris Club of creditor nations, which includes Japan as a second major lender to Sri Lanka, will provide financing assurances in line with the Fund's bailout, people with direct knowledge told Reuters on Thursday.

Sri Lanka has to restructure debt payments of about $13 billion on 11 outstanding bonds, approximately 50% of its total foreign currency debt.

The group represents around 60% of all Sri Lanka's international bondholders, according to a person close to the creditors, who asked not to be named because details on the group composition are not public.

Bondholders have also called for Sri Lanka's domestic debt to be "reorganised in a manner that both ensures debt sustainability and safeguards financial stability," the statement added.

They also requested the opportunity to express their views on the "overall design" of the IMF program, it added.

"The bondholders appear to be indirectly seeking a domestic debt restructuring, which Sri Lanka is yet to agree to," said Udeeshan Jonas, chief strategist at CAL Group.

"The requirement seems to be more tilted towards reprofiling the domestic debt through maturity extensions rather for coupon or principal haircuts," he added.

(Reporting by Akriti Sharma in Bengaluru; Editing by Muralikumar Anantharaman, Simon Cameron-Moore and Toby Chopra)