Eurobond saga unravelling The road to default
The Eurobond prices, which were already trading below par, started a downtrend in the last quarter of 2019 with the outbreak of the anti-government protests and as the exchange value of the lira started to collapse. The straw that broke the camel’s back was the government’s decision to default on its Eurobond obligations in early March 2020. Eurobond prices plunged further plummeting to below $20. Prices have somehow stabilized since March. Bid prices on June 1, 2020 ranged around $16 to $18. Outstanding Eurobonds stood at $31.3 billion at the end of 2019.
Banks ask government to repay Eurobond on time
In early February 2020, the banks, which hold around $10 billion worth of Lebanese Eurobonds, had a premonition that a government default was imminent. The Association of Banks (ABL) said that the government must settle the $1.2 billion Eurobond that will be due on March 9, 2020 on time and should immediately start addressing the debt problem. The remaining time before the maturity of the bond is very short and does not allow for an efficient handling of this issue, the ABL said. The bond due in March is part of Eurobonds maturing between March and June this year totaling $2.5 billion. If the coupon payments, amounting to $875 million, are added the total becomes $3.4 billion. There is a need to reschedule or restructure the public debt through mutual agreement with creditors but this requires time, negotiations, and Governor of the Central Bank (BDL) said earlier that if the State and the banking sector don’t solve in a friendly manner the problem of the Eurobonds maturing between March and June, this will harm the banking sector and the country’s reputation. The banks could voluntarily accept a swap for these Eurobonds it’s up to them, he said.
