The Eurobonds' value has skyrocketed from 6.2 cents in mid-September to 13.47 cents earlier this week. It has tapered down a bit to 13 cents today. It is the highest price since more than 2.5 years. The upward trend coincides with the cease-fire with Israel and the perceived weakening of Hezbollah, and market hopes for a long-awaited presidential election in January 2025 followed by a new government that will possibly undertake reform measures that may include a resolution to the default on Eurobonds.
Goldman Sachs has estimated in a recent report the bond recovery value at 25 cents. Until recently, most international bank reports had estimated the eventual recovery value to be 15 cents.
Goldman Sachs' report, ‘CEEMEA Economics Analyst Report, Revisiting Lebanon Debt Recovery Values’, outlines a three-step methodology to estimate recovery values for Lebanon’s Eurobonds:
1. Determining the Haircut: To bring public debt to a sustainable level—targeting a debt-to-GDP ratio below 80 percent within a decade—a 75 percent haircut on external debt is deemed necessary. 2. Applying the Haircut: With total debt projected at $47.3 billion in 2025, including past-due interest and $2.9 billion in bonds for depositor compensation, this translates into a $35 billion write-off. 3. Calculating Net Present Value (NPV): Recovery values are derived from ten-year bonds carrying an eight percent coupon, discounted at a 12 percent exit yield. These values will vary based on the payment profiles of individual bonds and prevailing market conditions.
For this restructuring to succeed, Goldman Sachs identifies key prerequisites: - A permanent ceasefire agreement with Israel - Election of a President and formation of a new government - Completion of IMF-mandated reforms - Parallel negotiations with bondholders and IMF approval of a final program.
On the economic front, the report assumes moderate fiscal reforms, a rebound in growth, and a gradual stabilization of the lira following an initial sharp devaluation. Inflation is expected to spike temporarily but stabilize at four percent annually.
Goldman Sachs’ Debt Sustainability Analysis (DSA) underscores the necessity of a 75 percent haircut for Lebanon’s financial recovery. This would enable the debt-to-GDP ratio to stabilize at 80 percent by 2035, provided reforms and growth targets are met.
The report also evaluates potential risks: - Downside: Delays in bond restructuring, slower growth, persistent currency depreciation, and higher banking sector costs. - Upside: Stronger fiscal consolidation, currency stabilization, and increased external financial support could lead to higher recovery values.
Significant challenges remain for the execution of this roadmap. The report highlights the reliance on political stability and effective governance to achieve these targets. Key assumptions—such as fiscal discipline and controlled currency depreciation—will require sustained effort in a country long plagued by political and economic turmoi
Teilweise erfolgreiche Verfassungsbeschwerde gegen die Versagung nachträglicher gerichtlicher Klärung der Gewährung ausreichenden diplomatischen Schutzes
Mit heute veröffentlichtem Beschluss hat die 3. Kammer des Ersten Senats des Bundesverfassungsgerichts der Verfassungsbeschwerde eines deutschen Journalisten, welcher im Rahmen eines Aufenthalts in Venezuela festgenommen und inhaftiert wurde, teilweise stattgegeben.Der Beschwerdeführer erhob nach seiner Haftentlassung und Rückkehr nach Deutschland Klage bei dem Verwaltungsgericht Berlin und beantragte verschiedene gerichtliche Feststellungen, die im Kern zum Inhalt haben, die Bundesrepublik Deutschland habe ihm während einer viermonatigen Haft in Venezuela weder hinreichenden diplomatischen Schutz noch ausreichende konsularische Betreuung gewährt. Die Klage wurde durch das Verwaltungsgericht teils als unbegründet und teils als unzulässig abgewiesen; das Oberverwaltungsgericht Berlin-Brandenburg hat den Antrag auf Zulassung der Berufung abgelehnt.Soweit die Klage mit der Begründung mangelnden Feststellungsinteresses als teilweise unzulässig abgewiesen wurde, verletzen die gerichtlichen Entscheidungen den Beschwerdeführer in seinem Grundrecht auf effektiven Rechtsschutz aus Art. 19 Abs. 4 Grundgesetz (GG). Der Beschwerdeführer hat insoweit Anspruch auf nachträgliche gerichtliche Klärung etwa der von ihm aufgeworfenen Frage, ob die Bundesrepublik Deutschland (hier das Auswärtige Amt) sein aus dem Staatsbürgerschaftsrecht und den Grundrechten folgendes Recht auf angemessenen diplomatischen Schutz im Ausland verletzt hat, indem es während seiner Gefangenschaft weder öffentlich gegen seine Inhaftierung protestiert noch von der Republik Venezuela seine Freilassung verlangt habe.Die Sache wird in diesem Umfang an das Verwaltungsgericht Berlin zurückverwiesen.
The caretaker government unanimously approved a decision to suspend the statute of limitations for claims by Eurobond holders for three years until March 9, 2028. The decision was made during a cabinet session last week.
The Council of Ministers also authorized the Minister of Finance to take all necessary measures to implement the decision, including amending the terms of Eurobond issuances. Without this measure, Eurobond holders would have been compelled to file lawsuits to preserve their rights to interest and principal payments on the bonds. The decision also paves the way for orderly negotiations to restructure the Eurobonds. While the move reduces the urgency for bondholders to file lawsuits, it does not eliminate the possibility entirely.
Caretaker Finance Minister Youssef Khalil said in a statement that despite Lebanon’s ongoing challenges, the country remains committed to reaching an amicable and fair resolution regarding the restructuring of Eurobonds. The extension of the statute of limitations ensures that bondholders will not need to resort to legal action to preserve their claims while participating in an organized and consensual restructuring process.
The decision stems from a proposal submitted by the Ministry of Finance, which highlights the following key points: 1. On March 7, 2020, the government decided to suspend payment of a Eurobond due on March 9, 2020. Shortly afterward, it suspended payments on all foreign-currency treasury bonds due to the country’s severe financial, economic, political, and security crises. 2. Under New York State law, bondholders have a six-year statute of limitations to claim interest and principal payments, beginning from the maturity date of each tranche. This deadline, along with other contractual deadlines, raised concerns among bondholders and financial institutions. 3. Failing to address these deadlines could lead to lawsuits against the Lebanese state, further complicating efforts to restructure its public debt.
The Ministry of Finance, supported by financial advisor Lazard and legal advisor Cleary Gottlieb, recommended suspending the statute of limitations and other deadlines until March 9, 2028, to mitigate risks.
The government’s decision includes the following provisions: 1. Suspending Lebanon’s right to invoke the statute of limitations under New York law or any other deadlines for claims related to Eurobonds until March 9, 2028. 2. Retaining the government’s right to raise other defenses in case of lawsuits. 3. Reaffirming the government’s intention to develop and implement an orderly Eurobond restructuring plan when conditions are favorable. 4. Authorizing the Finance Minister to represent Lebanon, amend bond terms, and take all necessary legal and procedural actions to implement the decision.
In 2024, the MoF resumed payments on both domestic and foreign debts. The government settled $300 million (LL28 trillion) in domestic obligations and $368 million in external debt, including arrears dating back to 2002–2023. The ministry highlighted the importance of fulfilling commitments to restore international trust, attract financial aid, and secure concessional loans critical for future recovery.
The treasury’s surpluses in 2023 ($364 million) and 2024 ($300 million) were instrumental in stabilizing the exchange rate and significantly reducing inflation. According to the Central Administration of Statistics, inflation dropped to 18 percent by the end of 2024, down from 222 percent in 2022.
The ministry emphasized the urgent need to prioritize restructuring the Eurobond portfolio to enable Lebanon’s reentry into global financial markets and access the funding necessary for sustainable economic growth
Lebanon is grappling with war, a paralyzed banking system, triple-digit inflation,rolling blackouts, and a $30 billion debt default. Yet investors can’t seem to get enough of its bonds.
After a world-beating rally last year, the Middle Eastern nation’s sovereign dollar debt took another leg up this week following the election of US-backed army commander Joseph Aoun as president. The appointment will bring to an end a 26-month stalemate over who should run the country and investors are betting that even a small move toward stability will be enough to sustain further gains in the highly-discounted bonds.
Lebanon Dollar Bonds Lead Emerging-Market Gains
Defaulted notes hit three-year high on political change
Source: Bloomberg
Appointing a new head of state is “very market friendly,” said Soeren Moerch, a Copenhagen-based portfolio manager at Danske Bank, who started buying Lebanese bonds in September. “We are still happy holders of the bonds.”
Last year’s more-than 100% rally in the bonds was driven in large part by the weakening of Hezbollah, the Iran-backed militia which is designated as a terrorist group by the US and wields significant political power in Lebanon. The group has seen much of its leadership killed and its capabilities degraded in an Israeli military offensive.
Now investors are debating whether new political leadership will weaken the group’s influence further and potentially open the door for dollar flows, reforms and a debt restructuring.
The bonds have surged to above 16 cents on the dollar from about 6 cents in September. Danske Bank, Pictet Asset Management and Bank of America are penciling a price of 20 cents, though they say the outlook beyond that will depend on success in implementing hoped-for reforms.
Daniel Wood, a London-based portfolio manager at William Blair Investment Management, which holds Lebanese bonds, said “the upside is not as favorable as it was.” There are still “many obstacles” the country needs to overcome before private creditors agree on providing any debt relief to the country, he said.
The first challenge will be to extend the 60-day ceasefire between Israel and Hezbollah that’s set to expire later this month, Wood said. But the country also needs to form a government that has sufficient legitimacy to implement reform, he added.
High Alert
Intrum’s lock-up agreement with creditors risks curtailing the size of the payout investors can expect from the insurance they bought against a default by the Swedish debt collector.
A key bondholder group of Country Garden, one of China’s most closely watched developers ensnared in the broader property crisis, isn’t on board with restructuring terms unveiled Thursday, people familiar with the matter said.
Chinese property developers are starting 2025 facing liquidation petitions, sliding share prices and mountains of debt, as the nation’s real estate crisis enters its fifth year with little sign of improvement.
Mudrick Capital Management’s flagship distressed opportunity fund gained a net 31.7% in 2024. The roughly $2 billion fund easily bested the S&P 500’s 23% gain and the 9.9% advance last year by the PivotalPath Event Driven Index, a hedge-fund benchmark.
Notes From the Brink
Direct lenders including Antares Capital, Blue Owl Capital and KKR are preparing to take over insurance claims manager Alacrity Solutions, the latest restructuring in the private credit market, according to people with knowledge of the matter.
BlackRock is set to hand over control of the company to its lenders less than two years after it purchased a 70% majority stake in the firm from Kohlberg, said the people who asked not to be identified as the details are private. BlackRock’s existing equity investment will be completely wiped out, the people said, adding that the firm invested about $560 million in equity at the time through its Long Term Private Capital strategy.
The Blackrock headquarters in New York, US. It is set to hand over control of Alacrity Solutions to lenders less than two years after it purchased a 70% majority stake.Photographer: Michael Nagle/Bloomberg
Alacrity’s debt load, which was already in place when BlackRock purchased the stake, includes a roughly $1 billion unitranche from direct lenders and a more than $500 million junior capital piece from Goldman Sachs Asset Management, the people said.
Alacrity, which handles insurance claims through a network of adjusters, struggled as weather-related claims dwindled, Bloomberg reported. More insurance companies have also brought adjusting services in-house, curtailing the company’s client base.
Now, those same lenders are ready to become the owners. First-lien holders will end up owning around 90% of the company under the restructuring plan, while the junior-capital provider GSAM will get the remaining piece, the people said.
Representatives for Antares, BlackRock, Blue Owl and GSAM declined to comment. KKR didn’t immediately respond to requests for comment on the additional financing details, but had declined to comment on the deal previously.
By the Numbers
Bonds of Luxembourg-based satellite telecommunications network provider SES fell on Friday as the sector is grappling with a rise in competition, amid the rapid ascent of Elon Musk’s Starlink, Giulia Morpurgo and Abhinav Ramnarayan report.
SES Bonds Sink as Starlink Competition Hurts
Source: Bloomberg
The company's €500 million hybrid notes dropped the most on record on Friday to 79.8 cents on the euro as the credit desk at BNP Paribas published a note highlighting the challenges ahead and recommended investors sell the company’s bonds. SES disputed the recommendation, stating that nothing had fundamentally changed for its business, while maintaining its financial targets and dividend policy.
The Latest on... Windhorst
Nathaniel Rothschild, the European banking dynasty scion, has suedLars Windhorst just months after agreeing to join his investment vehicle.
Rothschild took legal action after the embattled German financier defaulted on a personal loan, writes Lucca de Paoli. Rothschild had announced last year that he would become executive chairman of Windhorst’s Tennor Holding.
Lars Windhorst, chief executive officer of Tennor Holding BV, departs from a high court hearing in London, on Wednesday, July 12, 2023.Photographer: Hollie Adams/Bloomberg
“This relates to a separate matter distinct from Lord Rothschild’s investment in Tennor whereby he extended a short-term credit facility to Mr. Windhorst personally which is now in default,” a spokesperson for Rothschild said Thursday.
By Friday, however, things appeared to be looking up, as the same spokesperson reported “positive discussions” between the two sides. “He hopes to withdraw the claim and draw a line under this matter as soon as possible,” the spokesperson for Rothschild said, adding that he still intends to partner with Tennor.
One of the most controversial figures in European finance, Windhorst and his companies have faced a series of financial and legal woes as creditors turned to courts to claw back millions in unpaid debts.
Subscribe here to our Americas, EMEA and APAC distressed debt channels on the Terminal
Subscribe to our global Distress Watch, which tracks the universe of distressed bonds and loans including the week's biggest movers, top news stories and data aggregated by region, country, industry and currency
Thank you for reading The Brink, Bloomberg’s twice-weekly newsletter on corporate crisis and distressed debt. Contact us for feedback and tips at debtnews@bloomberg.net or DM on X to @jdorosario.
More From Bloomberg
Like The Brink? Check out these newsletters:
Going Private coverage of private markets and the forces moving capital away from the public eye
CFO Briefing for what finance leaders need to know
Money Stuff for Bloomberg Opinion’s Matt Levine’s newsletter on all things Wall Street and finance
Deals for the latest news and analysis, from IPOs to startup investing
Economics Daily for what the changing landscape means for policymakers, investors and you
