Lebanon Safer Than Dubai on Loaded Local Lenders: Arab Credit - Bloomberg

Lebanon is safer than Dubai for the first time since June in the market for credit default swaps as foreign investors bet demand from the country’s banks will offset the risk of buying the debt.

The cost of protecting Lebanon’s bonds against default for five years fell 5 basis points last week to 375, while Dubai’s contracts rose 3 basis points to 396, according to prices from CMA. Lebanon has a B1 credit rating at Moody’s Investors Service, four levels below investment grade, and B by Standard & Poor’s, the fifth-highest junk rating. Dubai isn’t rated.

Lebanon is the Arab world’s most indebted nation with about $52.6 billion in public liabilities, equal to 137 percent of the gross domestic product. Lebanese banks hold about 70 percent of the nation’s debt and are “highly” liquid with an average loan-to-deposit ratio of 35 percent, Credit Libanais SAL said in July. Dubai, whose holding company roiled global markets in 2009 as it sought a debt standstill, must repay about $31.2 billion by the end of 2012, the International Monetary Fund estimates.

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