Lebanon closed its largest ever $2.2bn Eurobond sale that was 233% oversubscribed, luring $4.9bn in offers, reflecting strong investor confidence in the country’s medium-term outlook despite political instability and sporadic security issues. The foreign currency-denominated issue was split into two tranches. An $800mn ten-year tranche earned a 6.2% interest rate while another $1.4bn 15-year tranche boasted a 6.65% interest rate.
The finance ministry was initially seeking to raise $1bn but the unprecedented investor interest prompted it to raise the final target. Foreign investors grabbed up 15% of the new issue and the rest went to local investors and bankers.
Lebanon’s Societe Generale Bank and Blom Bank, together with Citi, arranged the Eurobond issue.
The funds will help meet Lebanon’s budget needs in the short run but the parliament should approve further bond sales to cover all expenses for 2015, finance minister, Ali Hasan Khalil, said. Lebanon needs to tap the market for $4.4bn in Eurobond sales to meet all its financial requirements for 2015, Khalil noted. Thus a second Eurobond issue of up to $2.5bn is expected later this year.
Lebanon’s’ gross pubic debt grew 5.3% y/y to LBP100.44tn ($66.6bn) at end-November 2014, according to the latest official data available. The LBP-denominated debt grew 10.2% y/y to LBP61.6tn (61.3% of the total) at end-November whereas the FX-denominated debt retreated 1.5% y/y to LBP38.8tn.
Moody's downgraded in December last year Lebanon's government bond ratings to B2 from B1 and maintained the negative outlook. Lebanon’s creditworthiness is undermined by worsening government debt metrics and the sharp spillover effects from the Syrian crisis on government finances, economic growth and political stability, according to Moody’s.
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