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|16 May, 2019

Lebanon may delay issuance of Eurobonds

Parliament has authorized the government of Prime Minister Saad Hariri to borrow over $4.8bln in Eurobonds to finance all the needs of the Cabinet for 2020

Image used for illustrative purpose. 20 Euro banknotes are seen in a picture illustration, August 1, 2016.

Image used for illustrative purpose. 20 Euro banknotes are seen in a picture illustration, August 1, 2016.

REUTERS/Regis Duvignau

BEIRUT: Lebanon can afford to wait to issue between $2.5 billion to $3 billion in Eurobonds until the market conditions are ripe but the government will definitely not miss the $650 million Eurobonds which mature early next week, a banking source said. “The government has some options concerning the Eurobonds for the timbering. The Finance Ministry is studying the market in case the prices of the Eurobonds in the international markets change. The Finance Ministry may consider delaying until further notice the issuance of the $2.5 billion in Eurobonds. But one thing for sure is that the $650 million in Eurobonds which matures in May 20, will be replaced on time,” the banker told The Daily Star on condition of anonymity.

Parliament has authorized the government of Prime Minister Saad Hariri to borrow over $4.8 billion in Eurobonds to finance all the needs of the Cabinet for 2020.

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The banker stressed that Lebanon has never defaulted and never will.

“All successive governments have paid or rolled over all the maturing bonds on time. They all realize that any default will further impact Lebanon’s reputation among the international rating agencies. Lebanon does not want any further downgrade,” he added.

Nassib Ghobril, the head of the Economic Research department at Byblos Bank, also expressed confidence that the government will meet all its dues on time.

“May 20 Eurobond issue will be paid on time. The Central Bank will probably pay the $650 million bond just like it paid the $500 million Eurobonds in April of this year. It will also pay the $1.5 billion that matures in November,” he explained.

Ghobril pointed out the market is waiting for the government budget to see if it will create a positive shock to improve confidence and improve economic activity in the country.

“Everybody is waiting for the budget to see if there are any reforms. The existing Eurobonds is covering the entire 2019,” he added.

He said there is no urgency to issue the Eurobonds right now.

Ghobril believes that the main buyers of the new Eurobonds issue will probably be the Lebanese banks.

“Of course the banks will be waiting for the budget and reforms before making a commitment to buy these bonds from the government. Eventually, the bonds will be bought locally,” he added.

Ghobril said that foreign investors will also be looking at the reforms in the new budget before subscribing to the new Eurobond issue.

Out of the $38.1 billion outstanding sovereign Eurobonds, foreign investors hold around $9 billion of the issues.

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