January 17, 2020 / 5:35 PM / a month ago

Lebanon's bonds slump on bond swap worries

LONDON, Jan 17 (Reuters) - Lebanon’s shorter-dated bonds slumped on Friday, with several of them set for their steepest daily drop in nearly three months as worries mounted that a proposed bond swap plan could trigger a full-scale default.

The troubled country’s March 2020 issue shed 5.8 cents to 82 cents in the dollar, its most in a day since late October, while the June 2020 issue shed 3.6 cents to 74 cents in the dollar, according to RRPSBONDS data.

With Lebanon beset by its worst economic crisis since the 1975-90 civil war, the central bank had proposed that local holders of some the bonds swap them for longer-dated ones to ease the pressure on its finances.

Lebanon’s caretaker finance minister Ali Hassan Khalil asked the central bank to hold off on the plans however, after ratings agencies warned it could constitute a selective default, a source familiar with the matter said on Wednesday.

“I think there is concern by local holders that the swap will still go ahead and that they will be firmly encouraged to participate,” said Koon Chow, macro and FX strategist at fund manager UBP.

He said the higher pricing of the shorter-dated dollar issues also looked increasingly untenable against the longer-dated bonds, which have slid to as low as 40 cents in the dollar in recent weeks.

Straining under the one of the heaviest debt loads in the world, Lebanon has $2.5 billion in Eurobonds due in 2020 including a $1.2 billion bond set to mature in March. (Reporting by Tom Arnold and Marc Jones;)

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