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 face a serious 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 that was then worth more than 170% of GDP.

After a year of political stalemate, a new government has formed this month under the leadership of Sunni Muslim tycoon Najib Mikati, with three-quarters of the population now in poverty after one of the deepest depressions in modern history. Read more

The Lebanese pound has lost 90% of its value in the past two years, food prices have soared by more than 550%, and worsening shortages of basic goods, especially fuel and medicine, are bringing life back to life. daily difficult.

The creditors’ group said in a statement that it hoped for a rapid restructuring process, which would require the government “to engage significantly with the International Monetary Fund as well as with Lebanon’s international creditors and industry partners. official”.

The government was not immediately available for comment.

He supported parliamentarians on Monday in a political program focused on resuming talks with the IMF and restructuring the financial sector. Read more

The group of creditors includes the heavy funds Amundi, Ashmore, BlackRock, BlueBay, Fidelity and T-Rowe Price as well as a group of smaller hedge funds.

He estimates that he holds a “blocking stake” of more than 25% in 40% of the various sets of Lebanese bonds, which makes him a key player in any restructuring.

TALK WITH THE IMF

The bulk of the remaining bonds are held by domestic commercial banks or the Lebanese central bank, which bought $ 3 billion in debt directly from a previous government in 2019.

Mikati’s proposal includes the renewal of a stimulus package drawn up by the previous government, which projected a financial system deficit of some $ 90 billion – a figure approved by the IMF.

Lebanon’s defaulted bonds have risen more than 50% in recent days, though only around 12 cents in dollars to 18-19 cents.

The previous government said it had around $ 30 billion Eurobonds outstanding in international markets, plus an additional $ 50 billion issued in domestic markets.

Talks with the IMF last summer were stalled after many Lebanese political actors contested the scale of the losses.

Mikati said the talks will not be easy, but that they are a necessity, not a choice.

He gave no details of changes to the previous plan that might make it more acceptable to those who opposed it.

“Any discussion of debt restructuring is contingent on an IMF program, and this in turn depends on a reform plan and banking sector reform,” said Talal F. Salman, who resigned there. a year ago from his post as Lebanon’s chief negotiator in the restructuring talks and was one of the key figures of the default ruling.

“There is a massive interconnection between Eurobond restructuring and the financial system because you cannot do one without the other.”

Reporting by Marc Jones and Tom Arnold, additional reporting by Maha El Dahan in Beirut, editing by Karin Strohecker and Kevin Liffey

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