Investors Can’t Get Enough of Lebanon’s Busted Debt
Lebanon is grappling with war, a paralyzed banking system, triple-digit inflation and rolling blackouts — but investors are loving the bonds.
A Lebanese national flag above a Bank of Beirut office building in Beirut, Lebanon.
Photographer: Francesca Volpi/BloombergWelcome to The Brink. We’re reporters Jorgelina Do Rosario and Kerim Karakaya in London, covering political developments in Lebanon that have sparked a big bond market rally. We also have the latest on Alacrity and Windhorst. Follow this link to subscribe. Send us feedback and tips at debtnews@bloomberg.net or DM on X to @jdorosario.
Lebanon Leaps
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.
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 sued Lars 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.
“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.
More From the Terminal and Bloomberg Law
- Kirkland Partner Said Relationship ‘Tarnishes’ Ex-Judge’s Cases.
- Ligado Bankruptcy Buys Time for Viasat, AST SpaceMobile Deals.
- German Company Insolvencies Jumped in 2024 as Economy Shrank.
- IRS Beats Insurer in Bankruptcy Appeal Over BP Oil Spill Payout.
- Chinese Builder Sunac Receives Winding-Up Petition in Hong Kong.
- 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
Explore all newsletters at Bloomberg.com.
— With assistance from Carmen Arroyo, Ellen Schneider, Reshmi Basu, and Lucca De Paol
Keine Kommentare:
Kommentar veröffentlichen