LONDON, Sept 21 Reuters - A group of the world's biggest bond holders, including some of the biggest investment funds, on Tuesday urged the new government to commence debt restructuring talks as soon as possible to help address the country's financial crisis.
It defaulted on its international debt in March 2020 after years of political turmoil and economic mismanagement left it unable to service a debt burden of more than 170% of GDP.
After a year of political deadlock, Lebanese leaders put together this month a new government led by Sunni Muslim tycoon Najib Mikati, charged him with getting the economy back on its feet. Three-quarters of Lebanon's population is currently in poverty.
The Creditor Group said in a statement it expects and hopes the new government will promote a smooth, transparent and equitable debt restructuring process; Such a process will need the government to engage meaningfully with the International Monetary Fund as well as international creditors and official sector partners in Lebanon, it added.
The group includes heavyweight funds Amundi, Ashmore, BlackRock, BlueBay, Fidelity, T-Rowe Price as well as a group of smaller hedge funds.
It estimates it holds a blocking stake of more than 25% in 40% of Lebanon's various bond series, meaning it will be a strategic player in any meaningful restructuring.
The majority of the remaining bonds are held by Lebanon's central banks or by the domestic bank, which bought $3 billion of the debt directly from a previous government in 2019.
According to a draft policy programme seen by Reuters last week, Mikati's new government also wants to restart talks with the International Monetary Fund.
The last round of negotiations for IMF support broke down last year when Lebanon's political elite and banks baulked at the scale of financial sector losses set out in a recovery plan.
The signals from the New government have helped Lebanon's defaulted bonds recover more than 50% in recent days from around 12 cents in the dollar to 18 - 19 cents, which is still deeply distressed.