Saudi Arabian banks may pay the biggest price among their regional peers as the kingdom escalates an oil-price war, Bloomberg News reported. Lenders in the world’s largest oil exporter, already dealing with a fragile economy, now have to contend with plummeting crude prices -- which could lead to more problem loans -- and the fallout of the coronavirus that’s closed the kingdom’s schools and limited cross border movement. A surprise interest rate cut last week also means profit margins are under pressure.
North Africa/Middle East
Oman is in talks with banks to raise around $2 billion in loans, sources familiar with the matter said, as part of plans to manage an estimated $6.5 billion fiscal deficit that may widen due to plunging oil prices, Reuters reported. Oman, one of the weakest economies in the oil-rich Gulf region, has piled up debt in recent years to offset the impact of falling crude revenues. Its debt to GDP rate soared to nearly 60% last year from around 15% in 2015, and according to S&P Global Ratings it could reach 70% by 2022.
Investors in Lebanon’s dollar debt are nursing big losses after the government failed to repay a $1.2bn bond due on Monday, triggering the country’s first ever sovereign default, the Financial Times reported. Lebanese dollar bonds have since lost half of their value, with the March bond trading at roughly 28 cents on the dollar on Tuesday, down from 57 cents on Friday. London-based asset manager Ashmore owned more than 25 per cent of the bond at the end of last year, according to fund filings compiled by Bloomberg.
NMC Health has discovered almost $3bn of debt hidden from its board that has been used for unknown purposes, in the latest disastrous revelation to hit the Middle Eastern-focused healthcare group, the Financial Times reported. The company, which until its suspension last month traded in the FTSE 100, said it had identified more than $2.7bn in debt facilities that had previously not been disclosed to, or approved by, the board. This takes its group debt to more than twice as much as the reported $2.1bn.
Two of Dubai’s biggest banks bought loans made to DXB Entertainments PJSC from other regional lenders as part of plans by its majority owner to support the struggling theme park operator, according to people with knowledge of the matter, Bloomberg News reported. Emirates NBD PJSC and Dubai Islamic Bank PJSC acquired the debt from mainly non-United Arab Emirates-based lenders at a discount so Meraas Holding LLC can restructure the park operator with a small group of Dubai-based banks, the people said, asking not to be identified because the information is private.
Lebanon is set to default on its debts for the first time on Monday as its foreign currency reserves plummet to critically low levels, the Financial Times reported. Prime minister Hassan Diab has said that Lebanon will not be able to pay a $1.2bn Eurobond that matures on Monday as the country’s economic crisis deepens. The government is now preparing for negotiations with its creditors as it grapples with debts of more than $90bn, equivalent to about 170 per cent of the country’s gross domestic product.
Moody’s downgraded Oman’s credit rating deeper into junk territory on Thursday citing the Arab country’s lower fiscal strength, evident in its higher government debt and weaker debt affordability metrics than the ratings agency expected. Moody's cut Oman's rating here to 'Ba2' from 'Ba1' and changed the outlook to stable, Reuters reported. On Feb. 23, Oman’s Sultan Haitham bin Tariq al-Said said the government would work to reduce public debt and restructure public institutions and companies to bolster the economy.
Lebanon’s financial prosecutor has frozen the assets of almost half the crisis-hit country’s banks and their executives, piling further pressure on an already stressed financial sector, the Financial Times reported. The move against the banking sector, once seen as the pillar of Lebanon’s economy, comes as Beirut’s worst financial crisis for decades pushes the heavily indebted government towards its first default, and as popular fury towards the country’s ruling classes has focused on financial elites.
A majority of Lebanese MPs oppose paying looming Eurobond maturities, even if that leads to default, Parliament Speaker Nabih Berri said on Wednesday, compounding doubts over whether the heavily indebted state will meet a March 9 repayment, Reuters reported. Lebanon is facing an unprecedented economic and financial crisis, which came to a head last year as capital inflows slowed and protests erupted against the ruling elite. Its next maturity is a $1.2 billion Eurobond due on March 9.
Lebanese officials are considering asking local banks to buy back Eurobonds they sold to foreign funds, after the transactions gave outside creditors more leverage in a potential restructuring discussion if the government decides to default, former Finance Minister Ali Hasan Khalil said, Bloomberg News reported.