The government is likely to postpone a long-dated Eurobond issue until after the new government sets out its economic programme. ‘The deal is being reconsidered, ‘ says a spokesman for Credit Suisse First Boston, which was mandated to lead the issue along with Morgan Stanley Dean Witter.

The government had planned to start roadshows for the $350 million-500 million offering on 11 September (MEED 15:9:00). The fixed-rate bonds were expected to have a maturity of between 20-30 years, making the issue the longest ever to come out of Lebanon (MEED 1:9:00). The dollar-denominated notes were targeted at US and European institutional investors. The proceeds were to be used for debt restructuring. ‘The issue was in line with the government’s strategy of shifting the composition of the public debt into more foreign currency and longer maturities, ‘ says Nassib Ghobril of Lebanon Invest.

The decision to put the issue on hold until the composition and policies of the new government are known is thought to have been in response to feedback from investors. ‘The international markets want to see the results of the elections and the change in the programme of the new administration, ‘ says one analyst.

Bankers warn that a possible downgrade by the US’ Standard & Poor’s of the country’s BB- credit rating could raise the cost of the issue significantly if and when it does come to the market.

The agency says a downgrade could occur towards the end of the year if tax reform and asset sales targets are not met (MEED 25:6:00).

Growing concerns over the economy, particularly the public debt, which exceeds 135 per cent of gross domestic product (GDP) – one of the highest rates in the world – were recognised by US credit ratings agency Moody’s Investors Service on 7 September, when it placed the country’s B1 domestic currency debt rating on review for possible downgrade.

Moody’s says the government’s interest bill – including the small amount due on foreign currency debt – surpassed 90 per cent of total revenues and 100 per cent of total budgetary receipts over the first seven months of 2000. Moreover, the budget deficit for the first seven months stood at 47 per cent of budgetary expenditures compared to a target of 37.3 per cent for the year. The agency calls for accelerated privatisation to generate funds to lower the debt stock.