$1.7 billion swap between
Treasury and Central Bank

T-bills redeemed against Eurobonds

The Ministry of Finance (MoF) said it has completed a debt exchange with the Central Bank (BDL) valued at $1.7 billion.

The MoF redeemed treasury bills held by BDL worth LL2,562 billion against new Eurobonds denominated in US dollars of an equivalent value of $1.7 billion.

The MoF said in a statement that through this swap it will extend the maturity of two percent of the public debt by an average of 10.27 years. As a result of the deal the debt composition stands at 40 percent in foreign currencies and 60 percent in Lebanese Lira, which is in line with MoF’s debt management strategy.

The swap changed only the composition of the public debt, not the amount. It also strengthened BDL’s “foreign currency reserves through the acquisition of new dollar bonds which will support its liquidity management strategy on the local market,” according to the statement.

Gross public debt stood at $78.2 billion at the end of September, up 4.6 percent compared to a year earlier.

The treasury bills had been issued over the 2011-2017 period, and will mature between 2018 and 2025. Most of the T-bills, valued at nearly LL2,000 billion ($1.3 billion), will mature over the next two years.

The new Eurobonds are issued at par in two tranches. One tranche, valued at $1 billion, has a coupon rate of 7.15 percent and will mature in 2031. The second tranche, worth $700 million, will mature in 2028 and has a coupon rate of seven percent.

The coupon rate is comparable to the yields on Lebanese Eurobonds traded on international markets over the past few months, and is close to the rate of the last MoF issuance in March 2017.

“The majority of trading in the most recent period was among international investors, with minimal purchase from Lebanese commercial banks, which shows the trust of foreign asset managers in Lebanese papers, even during periods of price volatility,” the MoF said.