Lebanon reopens Eurobond

16 November 2001

Morgan Stanley Dean Witterand SchrodersSalomon Smith Barneyhave been awarded the mandate to reopen Lebanon's 2004 Eurobond. The banks are planning to market a fresh $200 million tranche on the December 2004 bond at the end of November. The yield on the issue, which will be priced at $98.50, is expected to be 10.7 per cent. The original $400 million bond, which was closed by JP Morgan Chase & Companyand Credit Suisse First Boston in December, carried a 9.5 per cent coupon and was priced at par. Bankers say that most of the new tranche is expected to be taken up by Banque du Liban (central bank), and the remainder will be purchased by local commercial banks.

Local banks finance most of Lebanon's debt, which is forecast to reach 170 per cent of gross domestic product (GDP) by the end of the year. However, there is growing unease in the banking community following a recommendation from the IMF that the government should consider devaluing the Lebanese pound as a solution to the fiscal crisis. A US call to freeze the assets of Hezbollah has also bred uncertainty.

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