Eurobond holders reorganize
and ready to appoint advisor

Move follows government’s intention

to reform and restructure the financial sector

Lebanon's international bondholders are nearing the appointment of a financial adviser, signaling a potential resumption of restructuring discussions with Lebanese authorities, five years after the default on all Eurobond series.

Six firms—Rothschild, Newstate, Alvarez & Marsal, Houlihan Lokey, GSA, and Centerview—have been invited to present proposals to the Ad Hoc Lebanon Bondholders Group. Legal counsel for the bondholders is being provided by White & Case, while the Lebanese government is advised by Lazard and Cleary Gottlieb.

The Ad Hoc Lebanon Bondholders Group, established immediately following the default in 2020, initially comprised international investment firms such as Amundi Asset Management, Ashmore Group, BlackRock Financial Management, BlueBay Asset Management LLP, Fidelity Investments, and Mangart Capital Management Ltd. Recently, new investors including Greylock, GMO, Morgan Stanley Investment Management, and Neuberger have joined the group. The group's primary objective has been to identify a sustainable and equitable resolution to Lebanon's significant debt challenges.

In 2022, negotiations stalled after the Lebanese government declined proposals from the International Monetary Fund (IMF), leading to a sharp decline in the value of defaulted Eurobonds, which traded below six cents on the dollar amid escalating economic turmoil. However, recent developments have seen these bonds trading at 18-19 cents, reflecting renewed optimism following changes in political leadership.

Earlier this year, the Ad Hoc Group expressed encouragement over the election of Joseph Aoun as President and the nomination of Nawaf Salam as Prime Minister. The group also acknowledged the Council of Ministers' proposal to extend the prescription periods of Eurobonds until March 9, 2028, and reiterated its readiness to engage with authorities to implement this extension and work towards resolving the prolonged debt default.

Concurrently, discussions on bank recapitalization are anticipated to proceed alongside creditor negotiations, potentially facilitating a swifter resolution compared to the five-year deadlock experienced previously. Should these parallel processes advance in harmony, a resolution may be achieved sooner than expected, potentially breaking the longstanding impasse.