Netty Ismail
“We are entering uncharted territory and the crisis is set to become increasingly more complex,” said Ehsan Khoman, head of Middle East and North Africa research and strategy at MUFG Bank n Dubai. “The market’s attention will now turn to complicated deliberations with bondholders on overhauling the entire debt profile. This is no easy task and there is no quick fix.”
“Creditors have begun the efforts to open the appropriate lines of communication with Lebanon and its advisers,” said Hans Humes, CEO of New York-based distressed-debt investor Greylock Capital Management, which had formed a group to talk to the government about its options.It isn’t clear if Lebanon will seek an International Monetary Fund bailout. Though IMF experts recently held meetings in Beirut, the issue of securing financing from the fund has become entangled in politics.
“The IMF involvement will be tricky given the current US policies,” said Humes at Greylock Capital. “There is no question that the heightened tension between US and Iran has complicated the situation in this and many other ways.”One question is whether the government will make a distinction between local and foreign bondholders, Fitch Ratings said in a report in February.
There is also concern over litigation risk, including the probability that some foreign investors could file a lawsuit asking the authorities in the US to impound Lebanon’s physical gold assets there, according to Fitch.Lebanon’s looming default is a blow for Ashmore Group, which was attracted to the bonds’ valuations as they tumbled in 2019 and had bet the government would pay out.
Source: Loan Digest (loandigest.net)
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