COLOMBO/LONDON (Reuters) – Sri Lanka hired Lazard (NYSE:LAZ) and Clifford Chance as financial and legal advisers respectively to represent the government in talks with international creditors, three sources familiar with the situation said on Monday.
The sources asked not to be named because talks are private.
A spokesman for Clifford Chance declined to comment. Lazard did not immediately respond to a request for comment.
A spokesman from the cabinet didn’t reply to a request for comment outside business hours.
The country is headed for a debt restructuring of over $12 billion on overseas debt as it is engulfed in a deep economic and political crisis.
The move comes after the island nation defaulted on a bond payment last week as a 30-day grace period expired.
A mix of Japanese, Chinese and Indian loans, a pile of bonds held by overseas investors and talks on an International Monetary Fund (IMF) bailout have added complexity to the South Asian nation’s worst financial crisis since independence in 1948.
The economy of the nation of 22 million people melted down after a large 2019 tax cut by President Gotabaya Rajapaksa drained government coffers and COVID-19 hit the lucrative tourism industry, leaving Colombo struggling to pay for such essentials as fuel, medicines and food.
“By far the most important thing is to what extent the government will have the political will, and the ability, to deliver on the pre-conditions for the IMF programme,” said Gramercy’s Co-head of Sovereign Research & Strategy Petar Atanasov.
“Governments are often willing to do the things that are required when their backs are completely against the wall.”
Other factors have included heavily subsidised domestic prices of fuel and a decision to ban the import of chemical fertilisers, which devastated the agriculture sector.
A creditor group of the largest holders of Sri Lanka’s sovereign dollar bonds hired Rothschild & Co as financial adviser and White & Case as legal adviser.