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.


Arab News recording exposes Nissan lawyer’s lie on IMF bailout for Lebanon

Updated 01 June 2020

Arab News recording exposes Nissan lawyer’s lie on IMF bailout for Lebanon

LONDON: Arab News has published the recording of an interview with a Nissan lawyer after he denied saying that a bailout of Lebanon by the International Monetary Fund (IMF) was linked to the extradition of fugitive tycoon Carlos Ghosn.

The former Nissan chairman fled to Beirut in December from Japan, where he faced charges of financial wrongdoing.

In a story published in Arab News Japan on Saturday, Sakher El Hachem, Nissan’s legal representative in Lebanon, said the multibillion-dollar IMF bailout was contingent on Ghosn being handed back to Japan. 

The lawyer said IMF support for Lebanon required Japan’s agreement. Lebanese officials had told him: “Japan will assist Lebanon if Ghosn gets extradited,” the lawyer said

“For Japan to agree on that they want the Lebanese authorities to extradite Ghosn, otherwise they won’t provide Lebanon with financial assistance. Japan is one of the IMF’s major contributors … if Japan vetoes Lebanon then the IMF won’t give Lebanon money, except after deporting Ghosn.”

On Sunday, El Hachem denied making the comments. “The only thing I told the newspaper was that there should have been a court hearing on April 30 in Lebanon, but it was postponed because of the pandemic,” he said. In response, Arab News published the recording of the interview, in which he can be clearly heard making the statements attributed to him. 

Japan issued an arrest warrant after Ghosn, 66, escaped house arrest and fled the country.

Now listen to the recording: