Lebanon will probably restructure debt, foreigners will be paid-senior banker

Salim Sfeir, chairman of the Association of Banks in Lebanon and chief executive of Bank of Beirut, is pictured during an interview with Reuters in Beirut, Lebanon. (File/Reuters)
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Updated 13 January 2020

Lebanon will probably restructure debt, foreigners will be paid-senior banker

  • One of the world’s most heavily indebted states, Lebanon is mired in a deep financial crisis
  • The crisis is rooted in decades of state corruption and bad governance

BEIRUT: Lebanon’s sovereign debt is probably going to be restructured in a way that hurts neither the economy nor depositors, and foreign holders will be repaid, the banking association head said on Monday.
Salim Sfeir also said he did not foresee problems with a proposal for Lebanese banks to swap their holdings in a maturing March Eurobond of $1.2 billion for longer dated notes, describing such swaps as “common practice.”
Central bank governor Riad Salameh has proposed the swap to Lebanese banks though it is up to the government to decide, senior financial and government sources said.
One of the world’s most heavily indebted states, Lebanon is mired in a deep financial crisis. A dollar shortage has led banks to control access to deposits and block transfers abroad.
Sfeir, the Bank of Beirut’s chief executive, said he had not seen such a crisis during his 50 years in banking.
“Everything we are doing is to preserve the wealth of Lebanon in Lebanon. If not, it will evaporate and Lebanon will be left without liquidity or foreign currency needed for essential goods,” he told Reuters.
“What is being done now is not against the people. Their money is secured and, let me add, the pressure is not from the large depositors.”
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The crisis is rooted in decades of state corruption and bad governance. Lebanon’s gross public debt is $89.5 billion, 38% of it in foreign currency. Lebanese investors hold the bulk of the debt. Foreigners hold 30% of the Eurobonds.
“Probably the debt is going to be restructured in one way or another but without affecting the deposits of the people and they are currently working to assure that,” Sfeir said. This would “give more oxygen in order to stimulate our economy.”
Asked how the restructuring should take place, Sfeir said this would be the responsibility of a new government. But the general idea is that “interest rates would go down and maturities would be extended.”
Politicians have failed to agree a new government or a rescue plan since Saad Al-Hariri quit as prime minister last October.
Lebanese Eurobonds of $2.5 billion are set to mature this year.
“Of course foreign holders will be repaid,” Sfeir said.
He said the aim was “not to leave any hard feelings with the international community.”
“By restructuring, let us define what we mean. Restructuring is not hurting anybody. Restructuring is working on (maturity) time and interest rates. It does not mean surgical operations,” he said.
Sfeir also said he opposed the formalization of the banking controls, saying it would then be “difficult to return to normal practice.”
The central bank told banks to increase their capital by 10% by the end of 2019 and a further 10% by June 30, 2020, to help them withstand the crisis.
All banks are working on this, Sfeir said.
“Now what is the probability of success with each and every bank? I don’t know, but I don’t anticipate major difficulties,” he said.


Big oil feels the heat on climate as industry leader promises: ‘We will be different’

Updated 34 min 5 sec ago

Big oil feels the heat on climate as industry leader promises: ‘We will be different’

  • Trump singles out ‘prophets of doom’ for attack
  • Greenpeace told the Davos gathering that the world’s largest banks, funds and insurance companies had invested $1.4 trillion in fossil fuel companies since the Paris climate deal

LONDON: Teenage environmental activist Greta Thunberg slammed inaction over climate change as the global oil industry found itself under intense scrutiny on the opening day of the World Economic Forum in Davos.

The teenage campaigner went head to head with US President Donald Trump, who dismissed climate “prophets of doom” in his speech.
She in turn shrugged off the US president’s pledge to join the economic forum’s initiative to plant 1 trillion trees to help capture carbon dioxide.
“Planting trees is good, of course, but it’s nowhere near enough,” Thunberg said. “It cannot replace mitigation. We need to start listening to the science and treat this crisis with the importance it deserves,” the 17-year-old said.
The 50th meeting of the World Economic Forum was dominated by the global threat posed by climate change and the carbon economy.
The environmental focus of Davos 2020 caps a year when carbon emissions from fossil fuels hit a record high, and the devastating effects of bushfires in Australia and other climate disasters dominated the news.
Oil company executives from the Gulf and elsewhere are in the spotlight at this year’s Davos meeting as they come under increased pressure to demonstrate how they are reducing their carbon footprint.
“We are not only fighting for our industry’s life but fighting for people to understand the things that we are doing,” said Vicki Hollub, CEO of Occidental, the US-based oil giant with extensive oil operations in the Gulf. “As an industry when we could be different — we will be different.”

‘Planting trees is good, but nowhere near enough,’ activist Greta Thunberg told Davos. (Shutterstock)

She said the company was getting close to being able to sequester significant volumes of CO2 in the US Permian Basin, the heartland of the American shale oil industry which is increasingly in competition with the conventional oil producers of the Arabian Gulf.
“The Permian Basin has the capacity to store 150 gigatons of CO2. That would be 28 years of emissions in the US. That’s the prize for us and that’s the opportunity. People say if you’re sequestering in an oil reservoir then you are producing more oil, but the reality is that it takes more CO2 to inject into a reservoir than the barrel of oil that it makes come out,” Hollub said.
The challenge Occidental and other oil companies face is to make investors understand what is happening in this area of carbon sequesteration, she added.
The investment community at Davos is also looking hard at the oil industry in the face of mounting investor concerns.
Greenpeace told the Davos gathering that the world’s largest banks, funds and insurance companies had invested $1.4 trillion in fossil fuel companies since the Paris climate deal. It accused some of these groups of failing to live up to the World Economic Forum goal of “improving the state of the world.”