October 10, 2019 / 12:44 PM / 12 days ago

Lebanese dollar bonds drift as markets await UAE financial support

LONDON, Oct 10 (Reuters) - Bond investors mulling whether to buy new Lebanese debt later this month were seeking evidence on Thursday of a tangible commitment of financial support for the deeply indebted country from the United Arab Emirates.

No official announcements from Beirut or Abu Dhabi have followed since Lebanese Prime Minister Saad al-Hariri said on Tuesday, during a visit to the Gulf state, that the UAE had promised investments and financial assistance.

Lebanon is hoping to sell a new Eurobond of around $2 billion this month, with cash raised earmarked for refinancing maturing debts and shoring up Lebanon’s shaky public finances.

International appetite for the deal appears muted, however, with fund managers saying they are wary of lending as Beirut grapples with multiple national and geopolitical concerns.

Lebanon’s 2037 dollar bond was broadly unchanged in Thursday trading while its 2030 issue was 0.11 cents higher in price at 66.1 cents in the dollar, Tradeweb data showed.

Prices are below levels reached last month when several bonds notched up record daily gains after Saudi Arabia’s Finance Minister Mohammed al-Jadaan said it was talking to the Lebanese government about providing financial assistance.

Hariri led a Lebanese delegation to the UAE to try to drum up funds to ease fading investor and depositor confidence that has pressured Lebanon’s currency and strained its lenders and central bank.

“Markets seem to be pricing in some support from UAE or Saudi Arabia,” said Farouk Soussa, senior Middle East and North Africa economist with Goldman Sachs.

“There’s a sense that something is imminent but there are still big questions about what that will be. Direct financial support is needed to alleviate near-term liquidity pressures — MOUs (memorandum of understandings) and long-term investment agreements would be less helpful.”

The cost of insuring exposure to Lebanon’s sovereign slipped this week after Hariri said he was hoping the UAE would inject cash into its central bank. In the most tangible sign of UAE support so far, its government on Monday lifted a ban on its citizens visiting Lebanon.

Lebanon’s five-year credit default swaps (CDS) were trading at 1,242 basis points on Thursday, unchanged from the previous day’s close, according to IHS Markit data. (Reporting by Tom Arnold; Editing by Catherine Evans)

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