Eurobond issue
twice oversubscribed

$2.2 billion is the largest
issue in the country’s history

The Ministry of Finance finalized today the issuance of Eurobonds worth $2.2 billion.

“This is the biggest issuance in Lebanon’s history since our entry into the financial markets in 1990s,” said the Minister of Finance, Ali Hassan Khalil. “Lebanon has issued thus far issued Eurobonds of $2.3 billion, but it was a replacement process that led to the issuance of new bonds, and thus not a completely new issuance like it is now,” he said.

Many factors have contributed to the success of this Eurobond issuance. “There are positive signs of confidence in Lebanese bonds and the country’s capability to meet its international financial obligations,” said Khalil. “Low oil prices are generating a surplus in global financial markets. We were also keen on benefiting from relatively low interest rates in these markets, especially on long term bonds,” he said.

Khalil said that issuance of Eurobonds in a foreign currency is characterized by its low cost, compared to borrowing in the local currency. For instance, the cost of borrowing in the local currency for 10 years is 7.46 percent, compared to 6.20 percent if borrowing in a foreign currency, for the same period.

The Ministry of Finance previously announced its intention to issue Eurobonds worth $1 billion, in order to finance the State’s financial needs. “We noticed high demand beyond our expectations, reaching $4.9 billion,” said Khalil. “It is an exceptional number, representing 233 percent of the size of demand. That’s why we took the initiative to issue Eurobonds of $2.2 billion,” he said.

The Eurobonds issuance has been divided into two categories. The first of $800 million with a maturity date of 2025 and an average yield of 6.2 percent. The second of $1.4 billion with maturity date of 2030 and an average yield of 6.65 percent. “These are excellent yields if compared to yields available in secondary markets,” said Khalil.

The contribution of foreign financial institutions to Eurobond subscription was 15 percent. “This is a sign of continuous trust of international demand on Lebanese bonds,” said Khalil.

Lebanon’ public debt reached $66.5 billion at the end of 2014, where 62 percent of that debt was in lira and 38 percent was in foreign currency, according to the Minister. “We are still maintaining a level of debt in foreign currency lower than the debt in lira,” said Khalil.
The Eurobond issuance was managed by Blom Bank, SGBL, and Citibank.

The Minister said that this Eurobond was issued in the absence of any law that allowed the issuing of Eurobonds. Khalil urged Parliament to issue such a law before next June.