Lebanon on verge of debt default, barring last-minute deal

BEIRUT: Lebanon looks set to announce on Saturday it cannot make upcoming dollar bond payments and wants to restructure $31 billion of foreign currency debt, sources said, unless a last-minute deal with creditors is found to avoid a disorderly default.

Debt default would mark a new phase in a financial crisis which has hammered Lebanon’s economy since October, slicing around 40% off the value of the local currency and leading banks to deny savers full access to deposits.

Prime Minister Hassan Diab will announce Lebanon’s decision on the Eurobonds after government meetings on Saturday, just two days before the heavily indebted state was due to pay back holders of a $1.2 billion Eurobond due on March 9.

“Lebanon is heading tomorrow towards announcing it will halt payment, or its incapacity to pay the Eurobonds and the interest,” a senior political source involved in government discussions on the matter told Reuters.

“The Lebanese government will do all it can to reorganise its relations with its debtors and to open the door for negotiations,” the source said. “When we talk about restructuring, we are talking about all the (Eurobond) debt of $31 billion.”

The senior source and three others familiar with the matter told Reuters last-minute contacts continued, but all expressed doubt a breakthrough was possible. A second senior political source said these efforts had aimed to avoid a disorderly default but there was little hope of a deal.