September 12, 2019 / 12:06 PM / 2 months ago

Lebanon still studying plans for potential dollar debt sale: finance minister

BEIRUT (Reuters) - Lebanon is still considering the possibility of a new dollar debt sale and has not yet announced any issuance, Finance Minister Ali Hassan Khalil told Reuters on Thursday.

FILE PHOTO: Lebanese Finance Minister Ali Hassan Khalil attends a cabinet meeting at the government palace in Beirut, Lebanon, May 21, 2019. REUTERS/Mohamed Azakir

Khalil said last week that one option in front of Lebanon for paying its debt obligations for the year would be to issue $1.5-2 billion in dollar bonds. Beirut has a key $1.5 billion bond repayment coming up on Nov. 28.

“The ministry has not announced any issuance and has not taken any step yet regarding bonds,” he told Reuters on Thursday.

It has not issued Eurobonds since a $3 billion sale in May 2018 that came shortly after a $5.5 billion debt swap with the central bank, which was issued with Eurobonds in exchange for Lebanese pound T-Bills.

Lebanon did not carry out a previously announced May 20 issue which would have covered its foreign currency obligations for the rest of 2019.

Sources told Reuters that a May debt maturity was instead paid off with the central bank providing funding to the finance ministry.

Khalil met Central Bank Governor Riad Salameh on Thursday to discuss foreign and local currency debt. They were confident “in how things are going and their stability despite all the pressures,” a finance ministry statement said.

Eurobond yields have risen to new highs amid growing regional political tensions and slow progress by politicians on enacting reforms needed to secure international donor funding and put the economy on a sound footing.

The yield — a proxy of the government’s borrowing costs — on a 2021 maturing bond is currently 19.8%. LB025088247=

The only country to issue a dollar bond over $500 million with a double-digit yield this year was Ecuador, which had a 10-year issue at 10.75 pct.

The Lebanese finance minister said on Wednesday he passed the draft 2020 budget to cabinet — which will then debate it — with a lower deficit projection than in the 2019 budget.

“We need now to sell more bonds in foreign currency that we will issue. The (central bank) governor and I will come up with a plan for how we can work on attracting part of that amount that could maybe be between $1.5-2 billion, to cover what will become due from previous issuances,” Khalil told a talk show on Lebanon’s MTV television a week ago.

“We have already agreed there will be a number of tools that complement each other. Within this are issuances at low interest rates, (and) a program of issuing Eurobonds that we need from now to the end of the month,” he said.

With one of the world’s highest debt burdens, low growth and crumbling infrastructure, Lebanon’s economy is struggling. The government has vowed to implement long-delayed reforms to ward off a crisis.

Fitch ratings agency downgraded the sovereign to CCC last month on debt-servicing concerns. At the same time, S&P Global affirmed Lebanon’s credit rating at B-/B with a negative outlook, saying it considered Lebanon’s foreign exchange reserves sufficient to service government debt in the “near term”.

Reporting by Lisa Barrington, Laila Bassam, and Ellen Francis; Additional reporting by Marc Jones; Editing by Toby Chopra

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