Lebanon issued a $400 million Eurobond due in 2004 at a fixed rate of 9.5 percent, or a spread of 410 basis points over similar US treasuries. The 4-year bond was increased to $400 million, up from the initially targeted $300 million.
The issue is part of a $1.5 billion foreign borrowing plan approved by Parliament in February and constitutes the first sovereign issue by the new government of Prime Minister Rafik Hariri. The Finance Ministry said that Lebanon was able to execute this transaction at tight yield levels despite volatile market conditions following the Argentina and Turkey crisis, which demonstrates the strength and resilience of Lebanon’s investor base.
Lebanese institutions subscribed to 65 percent of the bond with the balance spread between Arab (25 percent) and European (10 percent) institutional investors. J.P. Morgan and CSFB jointly executed the bond’s issuance.
Lebanon is the largest issuer of Eurobonds in the Middle East and North Africa region, with Lebanese banks holding the majority of the country’s $4.1 billion in Eurobonds and $18 billion in Lebanese pound treasury bills. Last October, the Central Bank allowed this exposure to rise by increasing from 70 percent to 75 percent the limit of foreign bank assets that could be invested in Eurobonds.
International rating agency Standard & Poor’s downgraded in September Lebanon’s long-term currency ratings citing the country’s deteriorating public finances. — ( Lebanon Invest )