August 21, 2019 / 3:29 PM / 3 months ago

UPDATE 3-Lebanon speaker has "positive" feeling on credit rating-newspaper

* S&P due to publish review of Lebanon on Friday

* Fitch review also expected soon

* Lebanon has one of world’s largest public debt piles (Adds graphic, markets data)

BEIRUT/LONDON, Aug 21 (Reuters) - Lebanese Parliament Speaker Nabih Berri said he had a “positive” feeling over a sovereign credit rating report expected later this week, although he had no information about it, Lebanese newspaper al-Joumhouria reported on Wednesday.

Lebanon, saddled with one of the world’s heaviest public debt burdens and blighted by years of low economic growth, is seeking to put its public finances on a sustainable path by implementing long-delayed economic reforms.

However, markets have been pricing in the risk of a sovereign credit rating downgrade in recent days.

S&P is due to publish its review of Lebanon on Friday. Fitch Ratings is also expected to release a report soon, though it has not said when. An S&P spokeswoman said it does not comment on future ratings actions.

Asked about talk of a negative rating, al-Joumhouria cited Berri as telling visitors: “I do not know. I have a positive sense and impressions (and) reassurance, but in principle I don’t have information”.

In separate comments about Lebanon’s sovereign ratings, Berri told a group of lawmakers that “all the positive indications that happened may give Lebanon an extra opportunity for the sake of correcting the path”.

The comments were relayed by lawmaker Ali Bazzi after the meeting. He was referring to factors including the resumption of cabinet sessions that had been stalled by a political crisis.

Mounting worries about Lebanon’s finances saw S&P put the country’s B- rating, already a non-investment grade rating, on a negative outlook at the start of March. In January, Moody’s downgraded Lebanon’s rating to Caa1.

Dollar-denominated bonds issued by Lebanon’s government dropped to fresh lows on Wednesday, with the 2027 issue slipping by 1.3 cents in the dollar and the 2026 issue dropping by 1.2 cents, according to Tradeweb data.

The cost of insuring against a Lebanese sovereign default has also risen, with 5-year credit default swaps (CDS) quoted on Wednesday by IHS Markit at 1,148 bps, up 11 basis points from the previous day close. Markit calculations, based on Tuesday’s closing prices, estimate a 52% probability of a sovereign default within the next five years.

Goldman Sachs, in an Aug. 16 week ahead note, said “the steady deterioration in Lebanon’s FX liquidity position indicates a likely downgrade to CCC (by S&P), which would bring the ratings in line with those of Moody’s”.

Reporting by Tom Perry and Laila Bassam in Beirut and Tom Arnold in London; Graphics by Sujata Rao in London; Writing by Tom Perry; Editing by Gareth Jones

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