Lebanon to Default on $1.2 Billion Payment, Seek Restructuring - Bloomberg:
Lebanon plans to miss a $1.2 billion Eurobond payment due Monday and seek talks with creditors to restructure its entire $90 billion debt pile, setting the stage for the first default in the crisis-ridden country’s history.
“Our foreign currency reserves have reached a critical and dangerous level, forcing the Lebanese Republic to suspend payment on its March Eurobond,” Prime Minister Hassan Diab said in televised address. “How can a country’s economy grow on borrowing and how can we be truly free while we’re drowning in debt?”
The premier, who only formed his government two months ago amid months of nationwide protests, said the country’s ratio of debt to gross domestic product had reached 170% and it was neither right nor possible to keep borrowing to “finance corruption” that had become entrenched in the public sector. Diab said his government would seek to restructure its debt through negotiations with bondholders.
The announcement opens the way for a long-anticipated bond overhaul in a country with one of the world’s highest debt loads, dwindling foreign-currency reserves and double-digit inflation. Negotiations will be complicated by political divides that have held up previous efforts to turn around the economy and high foreign ownership of bonds maturing this year. Lebanese banks and the central bank hold most of the rest of the government’s Eurobonds.
Lebanon plans to miss a $1.2 billion Eurobond payment due Monday and seek talks with creditors to restructure its entire $90 billion debt pile, setting the stage for the first default in the crisis-ridden country’s history.
“Our foreign currency reserves have reached a critical and dangerous level, forcing the Lebanese Republic to suspend payment on its March Eurobond,” Prime Minister Hassan Diab said in televised address. “How can a country’s economy grow on borrowing and how can we be truly free while we’re drowning in debt?”
The premier, who only formed his government two months ago amid months of nationwide protests, said the country’s ratio of debt to gross domestic product had reached 170% and it was neither right nor possible to keep borrowing to “finance corruption” that had become entrenched in the public sector. Diab said his government would seek to restructure its debt through negotiations with bondholders.
The announcement opens the way for a long-anticipated bond overhaul in a country with one of the world’s highest debt loads, dwindling foreign-currency reserves and double-digit inflation. Negotiations will be complicated by political divides that have held up previous efforts to turn around the economy and high foreign ownership of bonds maturing this year. Lebanese banks and the central bank hold most of the rest of the government’s Eurobonds.
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