S&P downgrades protest-hit Lebanon

The demonstrations have rocked Lebanon since October 17, forcing the government to resign last month and banks to close. (File/AFP)
Updated 16 November 2019

S&P downgrades protest-hit Lebanon

  • S&P downgraded three Lebanese banks
  • Moody’s rating agency downgraded Lebanon’s sovereign debt

BEIRUT: S&P Global Ratings Friday downgraded Lebanon’s sovereign debt, saying a twin political and economic crisis had hit investor confidence and constrained the government’s funding model, which relies on deposit inflows.
The move to lower the protest-hit country’s credit ratings to ‘CCC/C’ from ‘B-/B’ with a negative outlook came one day after S&P said it had downgraded three Lebanese banks.
It also came after Moody’s rating agency downgraded Lebanon’s sovereign debt earlier this month, saying sweeping anti-government protests had hit investor confidence and threatened macro-economic stability.
The demonstrations have rocked Lebanon since October 17, forcing the government to resign last month and banks to close.
They were fueled in part by fears of a currency devaluation and a dollar shortage after banks restricted access to the greenback, causing the exchange rate to spike on the black market.
ATMs no longer dispense dollar bills and banks have capped the amount that can be withdrawn from branches or transferred abroad.
As a result, the exchange rate in the parallel market has surpassed 1,800 Lebanese pounds for every dollar — a spike from the pegged rate of 1,500.
On Friday, S&P said, “diminishing confidence in Lebanon’s governance and economy have led to a reversal in bank deposit inflows, which have historically financed Lebanon’s elevated fiscal and external deficits.”
“Bank closures and unofficial foreign currency transfer restrictions raise questions about the sustainability of the exchange rate regime, further eroding confidence,” it added in a statement on its website.
Even before the protests began, growth in Lebanon had plummeted in the wake of repeated political deadlocks in recent years, compounded by the war in Syria.
Public debt stood at more than $86 billion, or higher than 150 percent of GDP, according to the finance ministry.
S&P on Friday said it expects the general government deficit will average 11.6% of GDP over 2019-2022 and gross general government debt will increase to 169% of GDP by 2022.
It also called for the formation of a technocratic government — a key demand of the country’s protest movement.
“If a new, largely technocratic government is formed within the next month and is able to introduce immediate policy reforms... this could help defuse social tensions and support depositor confidence.”


Saudi Aramco shares soar at maximum 10% on market debut

Updated 2 sec ago

Saudi Aramco shares soar at maximum 10% on market debut

  • Company is now world’s largest publicly traded company, bigger than Apple

RIYADH: Saudi Aramco shares opened at 35.2 riyals ($9.39) on Wednesday at the Kingdom’s stock exchange, 10 percent above their IPO price of 32 riyals, in their first day of trading following a record $26.5 billion initial public offering.
Aramco has earlier priced its IPO at 32 riyals ($8.53) per share, the high end of the target range, surpassing the $25 billion raised by Chinese retail giant Alibaba in its 2014 Wall Street debut.
Aramco’s earlier indicative debut price was seen at 35.2 riyals, 10 per cent above IPO price, raising the company’s valuation to $1.88 trillion, Refintiv data showed.
At that price, Aramco is world’s most valuable listed company. That’s more than the top five oil companies – Exxon Mobil, Total, Royal Dutch Shell, Chevron and BP – combined.
“Today Aramco will become the largest listed company in the world and (Tadawul) among the top ten global financial markets,” Sarah Al-Suhaimi, chairwoman of the Saudi Arabian stock exchange, said during a ceremony marking the oil giant’s first day of trading.
“Aramco today is the largest integrated oil and gas company in the world. Before Saudi Arabia was the only shareholder of the company, now there are 5 million shareholders including citizens, residents and investors,” said Yasir Al-Rumayyan, the managing director and chief executive of the Saudi Public Investment Fund.
“Aramco’s IPO will enhance the company’s governance and strengthen its standards.”
Amin Nasser, the president and CEO of Saudi Aramco, meanwhile thanked the new shareholders for their confidence and trust of the oil company.
The sale of 1.5 percent of the firm, or three billion shares, is the bedrock of Crown Prince Mohammed bin Salman’s ambitious strategy to overhaul the oil-reliant economy.
Riyadh’s Tadawul stock exchange earlier said it will hold an opening auction for Aramco shares for an hour from 9:30 a.m. followed by continuous trading, with price changes limited to plus or minus 10 percent.

The company said Friday it could exercise a “greenshoe” option, selling additional shares to bring the total raised up to $29.4 billion.
The market launch puts the oil behemoth’s value at $1.7 trillion, far ahead of other firms in the trillion-dollar club, including Apple and Microsoft.
Two-thirds of the shares were offered to institutional investors. Saudi government bodies accounted for 13.2 percent of the institutional tranche, investing around $2.3 billion, according to lead IPO manager Samba Capital.
The IPO is a crucial part of Prince Mohammed’s plan to wean the economy away from oil by pumping funds into megaprojects and non-energy industries such as tourism and entertainment.
Watch the video marking Aramco’s opening trading: