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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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Morgan Stanley: Lebanon faces difficult debt restructuring but bonds are cheap

rocky
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Morgan Stanley: Lebanon faces difficult debt restructuring but bonds are cheap Empty Morgan Stanley: Lebanon faces difficult debt restructuring but bonds are cheap

Post by rocky Wed 25 Mar 2020, 3:31 am

Morgan Stanley: Lebanon faces difficult debt restructuring but bonds are cheap

Morgan Stanley: Lebanon faces difficult debt restructuring but bonds are cheap 19644






Economy News _ Baghdad
Estimates from Morgan Stanley indicated that Lebanon faces a complex and difficult debt restructuring process that could take up to two years, although the recent decline in its bonds made it appear cheap even if the worst scenarios were achieved.
Lebanon, one of the heaviest debtors in the world, suspended payments of all its $ 31.3 billion in international bonds this month, declaring that it could no longer pay them.
In an analysis published on Tuesday, Morgan Stanley said that there will be a need to reduce the debt burden, which equals between 100 percent and 125 percent of Lebanon's annual economic output, although this will not be easy in any way.
The legal terms of his bonds make him vulnerable to rejection by investors on the way to Argentina, which undermines the process, while shifting the burden to local banks is not an option because the banks themselves have contributed to debt absorption and will need to be recapitalized.
The crackdown on savers' and corporate deposits in banks, as Cyprus has done at the height of its crisis, will cause problems at the political level, and it may also be difficult to obtain support from the International Monetary Fund or elsewhere in the Middle East in light of the current situation.
"We see some benefit in gradually approaching debt restructuring, given the interlinkages between the Treasury, the central bank and local banks," Morgan Stanley said in his analysis.
"Given the lackluster growth outlook, it makes sense to reduce the debt burden across the broader public sector."
He presented three scenarios for restructuring, simple, medium and harsh, whereby international bondholders will face write-offs of either 50 percent, sixty percent or seventy percent of the value of their bonds, with the postponement of their five-year repayment dates or to 2032 or 2037 through new bonds.
In addition to other disturbances, this will mean that the money that will be recovered by bond holders (the recovery rate) will be less than in many debt restructuring operations around the world, but the ratio of debt to GDP in Lebanon is also higher than in most of these models.
Morgan Stanley tilted sixty percent of the possibility of resorting to the idea of ​​tougher restructuring, but he said that with the bonds falling to levels as low as 12 cents in the dollar this week, it now appears "attractive" even under this option.
"Bonds are traded without even a harsh restructuring being envisaged. But one of the fundamental problems is that restructuring may only solve certain complexities for the next year or two, which negatively affects its attractiveness somewhat," he said.


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