|Lebanese eurobonds doing well (Daily Star)
|International investment bank Merrill Lynch said Lebanese eurobonds are outperforming most similar bond issues in other emerging markets.
Saradar's weekly newsletter cited Merrill Lynch as saying that the 8 percent yield the eurobond is generating is acceptable compared to most papers in emerging Europe, the Middle East and Africa. Merrill Lynch also ruled out any negative movement on Lebanese eurobonds in the short term.
The Central Bank cut primary interest rates on Treasury bills and eurobonds after the success of the "Paris II" donor conference in Paris last November.
The donor states have pledged $4.4 billion in soft loans to Lebanon. So far, Lebanon has received $2.2 billion from Saudi Arabia, France, the United Arab Emirates, Kuwait, Malaysia and Oman.
The money will be used to reduce debt servicing by $300 million each year and also boost the foreign-currency reserves of the Central bank.
Merrill Lynch said that Lebanese eurobonds are likely to hold their gains and perform reasonably well in the short term, and said it didn't expect a war in Iraq to result in a sell-off by the key local holders. It added that the interest savings are substantial, as authorities are using the funds to swap short-term expensive debt with 15-year debt at 5 percent interest.
Merrill Lynch stressed the importance of the government generating funds from privatization and asset securitization in order for its adjustment program to succeed. It said that the sale of mobile licenses, which was supposed to occur in the first quarter of this year, is behind schedule, but added that the proceeds aren't vital for short-term financing, and that a sale that maximizes the benefits to the state is more important than the original deadline.
But the investment bank also warned that if the transaction isn't executed by the end of the first half of the year, the positive shift in confidence that has allowed interest rates to drop since the Paris II meeting may begin to disappear.
It said the sale of the licenses with revenue sharing could turn out to be a viable approach, as authorities would then securitize the government's 40 percent share of the revenues.
"This transaction would generate $1.35 billion," the report said, adding that the expected launch date for the securitization of tobacco monopoly is in March or April of this year, with projected proceeds of $700 million, as authorities are currently "finishing the technical and legal preparations."
The Daily Star