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By Marc Jones
LONDON, Sept.21 (Reuters) – A group of Lebanese bondholders, including some of the world’s largest investment funds, on Tuesday urged the new government to start debt restructuring talks as soon as possible to help deal with the country’s severe financial crisis.
Lebanon defaulted on its international debt in March 2020 after years of political upheaval and economic mismanagement made it unable to service a debt of over 170% of GDP.
After a year of political stalemate, Lebanese leaders this month put in place a new government led by Sunni Muslim tycoon Najib Mikati, tasking him with putting the economy back on its feet. Three quarters of the Lebanese population today live in poverty.
The creditors’ group said in a statement that it “hopes and expects the new government to promote a swift, transparent and fair debt restructuring process.”
“Such a process will require the government to engage significantly with the International Monetary Fund as well as with international creditors and partners in Lebanon’s official sector,” he added.
The group includes the heavy funds Amundi, Ashmore, BlackRock, BlueBay, Fidelity, T-Rowe Price as well as a group of smaller hedge funds.
He estimates that he owns a “blocking stake” of over 25% in 40% of Lebanon’s various sets of bonds, which means he will be a key player in any significant restructuring.
The majority of the remaining bonds are held by Lebanon’s national commercial banks or its central bank, which bought $ 3 billion in debt directly from a previous government in 2019.
According to a draft policy program consulted by Reuters last week, Mikati’s new government is also keen to resume talks with the International Monetary Fund.
The latest round of negotiations for IMF support collapsed last year when the political elite and Lebanese banks backed down from the scale of financial sector losses predicted in a stimulus package.
Signals from the new government have helped defaulting Lebanon bonds recover by more than 50% in recent days, from around 12 cents on the dollar to 18-19 cents, which is still deeply in trouble. (Reporting by Marc Jones and Tom Arnold, editing by Karin Strohecker and Catherine Evans)