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Lebanon Hires Credit Suisse, Bank of Beirut for Bonds

Nov. 4 (Bloomberg) -- Lebanon hired Credit Suisse Group AG and Bank of Beirut SAL to help sell $700 million of Eurobonds to refinance debt maturing this month, the Lebanese lender said on its website.

The government plans to sell $500 million of bonds maturing in eight years, with yields in the range of 5.15 percent to 5.25 percent, and $200 million maturing in 12 years with a yield range of 6.1 percent to 6.2 percent, the bank said.

Lebanese Finance Minister Raya Haffar el-Hassan said in an August interview that the country may sell Eurobonds or swap as much as $4.8 billion of debt maturing this year and next, as it looks to benefit from low global interest rates before central banks worldwide begin to tighten monetary policy.

Lebanon has about $893 million of Eurobonds maturing this month and in December, and $2.14 billion due next year. When interest payments are included, the total redemption would be $1.5 billion this year and $3.3 billion in 2011.

The country has already sold $1.2 billion of 10-year Eurobonds this year with an interest rate of 6.375 percent, to refinance debt that matured in March.

Prime Minister Saad Hariri’s national unity coalition, formed a year ago, has to finance public debt that the government expects to rise to $55.3 billion next year, or about 129 percent of gross domestic product.

Lebanon’s debt-to-GDP ratio has declined from a high of 180 percent at the end of 2006. It accumulated the debt to rebuild the country after a 15-year civil war that ended in 1990 and the conflict with Israel in 2006.

‘Continuing Borrowing Needs’

“Issuing new Eurobonds or rolling over maturing ones, instead of paying off the maturing bonds and retiring part of the public debt reflects the continuing borrowing needs of the government as a result of delays in implementing structural reforms,” said Nassib Ghobril, head of research at Byblos Bank SAL in Beirut.

Plans to sell two state-owned mobile-phone operators, which aimed to raise as much as $7 billion, were put on hold first because of internal political tensions and then due to the global credit crunch and parliamentary elections last year. Restructuring the state-owned power company, Electricite du Liban, which received $1.5 billion of government subsidies last year, has also been delayed.

Moody’s Investors Service rates Lebanon’s domestic and foreign-currency bonds at B1, four levels below investment grade. Standard & Poor’s rates Lebanon at B, five levels below investment grade.

To contact the reporter on this story: Massoud A. Derhally in Beirut, Lebanon at mderhally@bloomberg.net

To contact the editor responsible for this story: Ben Holland at bholland1@bloomberg.net

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