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Capital Markets

Lebanese consider bond issue

The Lebanese government is believed to be considering a $500 million international bond issue to cover debt payments reaching maturity.

The Lebanese government is believed to be considering a $500 million international bond issue to cover debt payments reaching maturity. This follows the treasury's June 2005 two-part $500 million Eurobond issue, half with a three-year maturity at 7.5% interest and half at an eight-year maturity with 8.75% interest. The issue covered $352 million of Eurobonds that matured in the same month.

The rumours notwithstanding, Amine Awad of the Banking Control Commission, Lebanon's independent banking supervisory authority, believes a small domestic issue could take place before another international issue. The treasury is apparently in discussion with local banks regarding a domestic bond issue to cover the maturing debt. Richard Fox, a sovereign analyst at Fitch Ratings, argues that for now "the government is aiming to pre-finance next year's maturities, so will access the market when it sees the opportunity". Lebanon's public debt currently stands at about 185% of GDP.

Awad believes an international issue will only come "after the government agrees its global plan for the total restructuring of the public debt".

The government discussed its reform plans with international donors during a September 19 preliminary meeting between Lebanese prime minister Fuad Siniora, finance minister Jihad Azour and US, European and Arab officials in New York.

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