Lebanon’s financial and legal advisers are in talks with holders of its dollar-denominated debt about restructuring but have not reached a deal, a source close to the government said on Monday, Reuters reported. The country is widely expected to restructure the sovereign bonds after a long-brewing economic crisis, which came to a head last year as capital inflows slowed and protests erupted against Lebanon’s ruling elite over corruption and bad governance.
North Africa/Middle East
NMC Health has called on lenders for time to stabilise its finances, as the embattled healthcare group looks to safeguard cash and sustain its operations. The company, which is under investigation by UK regulators, said on Monday that it had sought a so-called “informal standstill” agreement in which lenders hold off exercising any “rights and remedies” they may have in the event of “current or future defaults,” the Financial Times reported.
Lebanon’s banking lobby made a last-ditch appeal to the government to avoid a debt default and instead offer a swap into new notes for all bondholders, Bloomberg News reported. In the clutches of its worst financial crisis in decades, Lebanon is running out of time to decide how to handle a debt burden that economists say is no longer sustainable. It faces a choice of repaying more than $1.2 billion of Eurobonds due March 9 or restructuring liabilities to preserve dwindling foreign-exchange reserves.
NMC Health has hired Moelis to advise on debt restructuring as the struggling healthcare group faces signs of a cash crunch with staff members complaining about late salary payments, the Financial Times reported. The mandate was welcomed by lenders, who have become increasingly concerned about their loan exposure to the scandal-hit FTSE 100 company. Trading of NMC’s shares was suspended last week as the UK’s Financial Conduct Authority launched an investigation into its finances. “We just desperately need to see some stabilisation,” said one banker.
Lebanon intends to ask for a seven-day grace period for a $1.2 billion Eurobond that matures on March 9, as it is entitled to, in order to give financial advisers more time to draft a restructuring plan, a government source said on Thursday, Reuters reported. Lebanon would seek the seven-day grace period ahead of the March 9 date, the source said. Financial sources said the exercising of the seven-day grace period would make it more likely the government would seek to restructure the March 2020 Eurobond. Lebanon faces two further Eurobond maturities this year, one in April and one in June.
Lebanon has a lot more than just maturing Eurobonds to worry about. In addition to $31bn of those, the Middle Eastern nation’s central bank has $52.5bn of obligations in the form of foreign-currency deposits and certificates of deposit, according to calculations by Toby Iles and Jan Friederich, Hong Kong-based analysts at Fitch Ratings Ltd, Gulf Business reported. Mostly owed to Lebanese banks, these additional debts compound the country’s woes as it grapples with its deepest economic crisis in decades.
Lebanon is trapped in a full-scale emergency. It confronts a debt crisis, with sovereign borrowings amounting to 160 per cent of gross domestic product. It faces a fiscal crisis, with the budget deficit likely to reach 15 per cent of GDP last year, officials acknowledge, the Financial Times reported in a commentary. Then there is the currency crisis. Lebanon is almost out of dollars, in an economy that is 70 per cent dollarised. The Lebanese pound is still pegged to the dollar, but has lost more than 60 per cent of its value in the parallel exchange market.
For the third time in six months, British billionaire Mark Coombs is betting on bonds that many on Wall Street deem destined for default, Bloomberg News reported. Ashmore Group Plc, the $98 billion money manager led by Coombs, has been piling into Lebanon notes due March 9 just as many of its rivals warn a missed payment is all but certain. The firm boosted its holdings to more than 25% of the $1.2 billion of bonds, enough for a blocking stake if there’s a restructuring.
France is looking at options to help Lebanon recover from its financial crisis, including an International Monetary Fund (IMF) programme if Beirut seeks one, a minister said on Monday, Reuters reported. French Finance Minister Bruno Le Maire also told reporters in Abu Dhabi that he had discussed the situation in Lebanon with the United Arab Emirates leadership. “We are very concerned,” Le Maire said, adding that the United Arab Emirates and France will decide separately if and how to support the government in Beirut.
Oman’s Sultan Haitham bin Tariq al-Said said on Sunday the government would work to reduce public debt and restructure public institutions and companies to bolster the economy, Reuters reported. Haitham, in his second public speech since assuming power in January, said the government would create a national framework to tackle unemployment while addressing strained public finances. “We will direct our financial resources in the best way that will guarantee reducing debt and increasing revenues,” he said in the televised speech.