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Lebanon's new $725 milllion Eurobond issue oversubscribed

13 November 2010

BEIRUT: Lebanon issued Friday a $725 million dual-tranche offering with international orders accounting for 26 percent of subscriptions on the aggregate amount.

The transaction resulted in the lowest market yields ever issued by the Republic of Lebanon on fixed rate bonds with a weighted coupon average of 5.44 percent and an average time to maturity of 9.21 years.

The transaction was more than three times oversubscribed.

The first series consisted of a $500 million 5.15 percent coupon Eurobond due November 2018 (Series 56) with international accounts subscribing to 30 percent of the issue.

The second series was a $225 million 6.10 percent coupon Eurobond due October 2022 (Series 57) with international orders accounting for 16 percent of subscriptions.

The lead managers for the transaction were Bank of Beirut S.A.L, and Credit Suisse .

The proceeds of the issue were utilized for refinancing operations.

The transaction is the second market transaction executed by the Lebanese government in 2010 to refinance maturing debt following the issuance of a 10-year $1.2 billion Eurobond at par with a coupon of 6.375 percent as settled on March 9, 2010.

“The demand came from international fund managers, international banks and local banks. There is good appetite in the international market for the country’s sovereign issues,” a source told Reuters.

The source added that the international market was more interested in the 2018 issue, noting that foreign buyers had accounted for 30 percent of the demand for this tranche.

Finance Minister Raya Haffar Hassan hailed the success of the new issue as a confidence vote on Lebanon.

Hassan added that the issue was three times oversubscribed from the original amount.

“The interest rates on the new issue were the lowest in Lebanon’s history and the international bond markets with limited ceilings and foreign investors grabbed 26 percent of the entire Eurobond issue,” she said.

However, Hassan stressed that the Lebanese government could have managed to raise the size of the issue had the 2010 budget been endorsed earlier.

A parliamentary committee finally approved the government’s budget Thursday after 37 sessions which stretched over a year.

She suggested that March 8 Forces in the Finance and Budget Parliamentary Committee had deliberately prolonged the discussion on the budget for political reasons only.

One banker told The Daily Star earlier this week that the successful issuance of the Eurobonds proves that international investors are not too concerned about the political future of Lebanon despite the deep rift over the international tribunal. – The Daily Star

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