Government extends
deadline for Eurobonds

Target date: March 2028

The caretaker government unanimously approved a decision to suspend the statute of limitations for claims by Eurobond holders for three years until March 9, 2028. The decision was made during a cabinet session last week.

The Council of Ministers also authorized the Minister of Finance to take all necessary measures to implement the decision, including amending the terms of Eurobond issuances. Without this measure, Eurobond holders would have been compelled to file lawsuits to preserve their rights to interest and principal payments on the bonds. The decision also paves the way for orderly negotiations to restructure the Eurobonds. While the move reduces the urgency for bondholders to file lawsuits, it does not eliminate the possibility entirely.

Caretaker Finance Minister Youssef Khalil said in a statement that despite Lebanon’s ongoing challenges, the country remains committed to reaching an amicable and fair resolution regarding the restructuring of Eurobonds. The extension of the statute of limitations ensures that bondholders will not need to resort to legal action to preserve their claims while participating in an organized and consensual restructuring process.

The decision stems from a proposal submitted by the Ministry of Finance, which highlights the following key points:
1. On March 7, 2020, the government decided to suspend payment of a Eurobond due on March 9, 2020. Shortly afterward, it suspended payments on all foreign-currency treasury bonds due to the country’s severe financial, economic, political, and security crises.
2. Under New York State law, bondholders have a six-year statute of limitations to claim interest and principal payments, beginning from the maturity date of each tranche. This deadline, along with other contractual deadlines, raised concerns among bondholders and financial institutions.
3. Failing to address these deadlines could lead to lawsuits against the Lebanese state, further complicating efforts to restructure its public debt.

The Ministry of Finance, supported by financial advisor Lazard and legal advisor Cleary Gottlieb, recommended suspending the statute of limitations and other deadlines until March 9, 2028, to mitigate risks.

The government’s decision includes the following provisions:
1. Suspending Lebanon’s right to invoke the statute of limitations under New York law or any other deadlines for claims related to Eurobonds until March 9, 2028.
2. Retaining the government’s right to raise other defenses in case of lawsuits.
3. Reaffirming the government’s intention to develop and implement an orderly Eurobond restructuring plan when conditions are favorable.
4. Authorizing the Finance Minister to represent Lebanon, amend bond terms, and take all necessary legal and procedural actions to implement the decision.