Sri Lanka is seeking a five-month hold on a lawsuit filed by a bondholder over the country’s historic debt default, telling a New York federal judge that it wants more time to negotiate with private creditors.

The island nation was sued in July 2022 by Hamilton Reserve Bank Ltd., which sought full payment on more than $250 million of Sri Lanka’s dollar bond that was due that month. The bank says it holds more than 25% of the bonds, which would likely enable it to block any modification of the notes.

On Friday, Sri Lanka sought an extension of a delay of the lawsuit that was granted in November. Hamilton Reserve opposed the new request, saying that the country has kept the bank “in the dark” about the negotiations despite repeated requests for information.

Last year Wickremesinghe’s government negotiated preliminary deals to restructure about $10bn in debts that were due to bilateral creditors led by China, Japan and India. It also secured a restructuring of local currency debts, helping Sri Lanka to continue accessing $3bn in rescue loans from the IMF.

But in December an international bondholder committee that included fund firms BlackRock and Amundi said that “no substantive engagement has taken place between Sri Lanka and its private creditors”. Sri Lanka needs such a deal to keep loans flowing and eventually to return to market borrowing.

The committee also complained of “a significant lack of transparency” from government creditors about details of the terms that they offered Sri Lanka. Bondholders are looking for more details in order to formulate their own debt relief proposal.

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