Lebanon issues $1.6B eurobond to finance its foreign currency debt

Published November 2nd, 2015 - 07:00 GMT

Lebanon has launched a $1.6 billion sovereign eurobond, according to a statement issued by the Finance Ministry over the weekend.

“The current eurobond issue will allow bondholders to swap their bonds maturing on 19/1/2015 at a value of $318 million in addition to financing the government’s debt in foreign currencies for the second half of 2015 at a value of $1.282 billion,” the statement said.

It added that the issue would be divided into three categories: The first is for $500 million with nine-year maturity and 6.25 percent interest rate. The second is for $500 million with 13-year maturity and 6.65 percent interest rate while the third is for $600 million with 20-year maturity and 7.05 percent interest.

The statement said that the current eurobond issue witnessed oversubscriptions amounting to 113 percent while foreign banks and institutions subscribed to 10 percent and the rest of the demand came from local banks. “This reflects the continuous confidence of the international community in Lebanon,” the statement added.

It said that the swap rate reached 42 percent.

The Finance Ministry said earlier that the issue will be co-managed by SGBL Lebanon, Fransabank, Citibank and Standard Chartered.

Nassib Ghobril, head of the research department at Byblos Bank, said that Lebanese banks will continue to finance the government as long as deposits in the banking sector keep on increasing.

Citi, the global financial services group, indicated that bank deposits grew by about $8 billion in the 12 months leading to June 2015.

“As long as deposits continue to increase due to confidence of depositors in the banking sector, banks will be able to finance the private sector and at the same time the growing financing needs of the government,” Ghobril said.

Ghobril added that banks are facing a challenging environment because they would like to lend to the private sector and reduce their lending to the government but opportunities of lending in the private sector are regressing and the government’s borrowing needs are increasing.

“Banks would like to see the opposite happening,” he said. “This is why they have been calling upon the government to implement structural and fiscal reforms to reduce its borrowing needs.”


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