North Africa/Middle East

Lebanon's creditors are wary of the risk of even steeper losses as a devastating blast in Beirut complicates an already stalled debt restructuring process, the International New York Times reported on a Reuters story. Even before Tuesday's explosion in Beirut's port that killed 154 people, progress had been slow on a turnaround from deep financial turmoil that culminated in a default on Lebanon's foreign currency debt in March.

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As emergency services assess the toll from Tuesday’s deadly explosion in Beirut, one immediate consequence is becoming clear to analysts: it will ratchet up pressure on Prime Minister Hassan Diab to make meaningful progress in talks with international lenders and investors, Bloomberg News reported. For some observers, that means quickly addressing the internal divisions and foot-dragging that have stalled negotiations with the International Monetary Fund about a $10 billion loan program following the country’s March Eurobond default.

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Lebanon is hurtling toward a tipping point at an alarming speed, driven by financial ruin, collapsing institutions, hyperinflation and rapidly rising poverty — with a pandemic on top of that, the International New York Times reported on an Associated Press story. On Monday, the country's foreign minister resigned, warning that a lack of vision and a will to implement structural reforms risked turning the country into a “failed state.” The collapse threatens to break a nation seen as a model of diversity and resilience in the Arab world and potentially open the door to chaos.

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Hospital operator NMC Health has secured a $250 million financing facility which will allow it to continue to provide healthcare, its administrators Alvarez & Marsal said, Reuters reported. The loan is conditional on a planned second-phase restructuring, Alvarez & Marsal said on Monday, after its London-listed holding company was forced into administration in April following months of financial turmoil.. The administrators said the restructuring would allow the funding to support operations and stop adverse creditor actions.

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Lebanon may only count on the International Monetary Fund for as little as half the bailout it had originally sought to help unlock other assistance the country critically needs to bridge the crisis, according to a top official, Bloomberg News reported. With talks over a $10 billion loan program stalling for much of this month, the IMF could provide an amount in a range of $5 billion to $9 billion, Economy Minister Raoul Nehme said in an interview with Bloomberg Television. Although Lebanon’s economic collapse is accelerating, Nehme gave no time frame for when a deal might be reached.

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Lebanon had its rating cut to the lowest grade by Moody’s Investors Service, which said that bond investors will likely suffer major losses on their holdings as the government struggles to secure aid to ease a crippling financial crisis, Bloomberg News reported. Moody’s lowered Lebanon’s credit score to C from Ca, the same level as crisis-ravaged Venezuela. It reflects Moody’s “assessment that the losses incurred by bondholders through Lebanon’s current default are likely to exceed 65%,” the agency said in a statement.

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Hyperinflation has blighted Zimbabwe, Venezuela and the former Yugoslavia among others over the years, Reuters reported. Now, Lebanon has been gripped by the phenomenon, becoming the first country in the Middle East and North Africa to suffer from rapid, runaway price rises for goods and services. It joins Venezuela, which has been locked in hyperinflation since April, its second bout in recent years, according to Steve H. Hanke, Professor of Applied Economics at the Johns Hopkins University and an expert on the topic.

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Hospital operator NMC Health is looking to raise up to $250 million in debt while it prepares for insolvency proceedings in the United Arab Emirates and has picked Perella Weinberg Partners to advise it on the process, sources said, Reuters reported. The company, run by administrators Alvarez & Marsal, has also tasked Perella to advise it on the sale of UK-based Aspen Healthcare, a company it acquired in 2018, the two sources familiar with the matter said.

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Some of the world’s largest developing economies are set to face a fiscal crisis in the coming years unless they can roll back huge increases in public spending enacted in response to the Covid-19 pandemic, analysts have warned, the Financial Times reported. The economic downturn caused by the pandemic, combined with rising healthcare spending to tackle the spread of the virus, have caused budget deficits to soar in many countries. They will have to face the choice of risking public unrest by cutting back on spending, or negotiating with investors to restructure their debts.

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Lebanon’s central bank has set up a committee to restructure financially stricken commercial banks and study their performance, according to a memo by the bank seen by Reuters on Thursday, Reuters reported. The panel will also propose measures to preserve the soundness of the banking sector, the memo said. Lebanese banks are poised for a major shake-out after the country plunged into a financial crisis last October that has ballooned prices, slashed jobs, and brought on capital controls that have frozen people out of their dollar savings.

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