Lebanon’s Default Likely After March Bond, Oxford Economics Says - Bloomberg:
Lebanese authorities will be reluctant to announce a default on debt payments until a functioning government is formed, pushing back any plans for a bond restructuring to later this year, according to Oxford Economics.
Investors can reap a 13% return by buying Lebanon’s dollar-denominated note due March 9, London-based strategist Nafez Zouk said in an emailed note. While there’s an 85% probability those bonds will be repaid at maturity, dwindling foreign-currency reserves mean a default may still be announced in the second half of 2020, Zouk said.
The chances of Lebanon repaying its $2.1 billion bond maturing in April 2021 are “slim,” he said.
The recommendation comes after a record slump in the March bond last week, fueled by reports local lenders have been selling the instruments to avoid participating in a central bank-initiated voluntary debt swap.
Lebanese authorities will be reluctant to announce a default on debt payments until a functioning government is formed, pushing back any plans for a bond restructuring to later this year, according to Oxford Economics.
Investors can reap a 13% return by buying Lebanon’s dollar-denominated note due March 9, London-based strategist Nafez Zouk said in an emailed note. While there’s an 85% probability those bonds will be repaid at maturity, dwindling foreign-currency reserves mean a default may still be announced in the second half of 2020, Zouk said.
The chances of Lebanon repaying its $2.1 billion bond maturing in April 2021 are “slim,” he said.
The recommendation comes after a record slump in the March bond last week, fueled by reports local lenders have been selling the instruments to avoid participating in a central bank-initiated voluntary debt swap.
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