Moody’s Downgraded Lebanon’s Rating

Moody’s downgraded Lebanon’s rating to Caa2 on Tuesday as growing prospects for a debt rescheduling would categorize it as a default.
Hariri-Basil meeting.

“The downgrade to Caa2 reflects the increased likelihood of a debt rescheduling or other liability management exercise that may constitute a default under Moody’s definition since opening the review for downgrade of the Caa1 ratings at the start of October,” the agency said.

“Widespread social protests, the resignation of the government and loss of investor confidence have further undermined Lebanon’s traditional funding model based on capital inflows and bank deposit growth, threatening the viability of the peg and macroeconomic stability,” it warned.

It said the review period will allow it to “assess the likelihood of a debt restructuring scenario that could lead to losses for private investors that are larger than is consistent with a Caa2 rating.”

Moody’s also downgraded Lebanon’s senior unsecured Medium Term Note Program rating to (P)Caa2 from (P)Caa1, and affirmed the other short-term rating at (P)NP. The (P)Caa2 rating is also on review for downgrade.

“Lebanon’s long-term foreign currency bond and deposit ceilings have been lowered to Caa1 and Caa3, respectively. The long-term local-currency bond and deposit ceilings have been lowered to B2. The short-term foreign currency bond and deposit ceilings remain Not Prime,” the agency added.

As the street continued to boil over more than one Lebanese area, Monday’s meeting between Prime Minister Hariri and Prime Minister Bassil at the center of the Hariri residence, the first between the two men following Hariri’s resignation, lasted no more than three hours. A second meeting is expected soon.

Bassil, to the ground in support of President Michel Aoun and Minister Bassil, and the strong response that followed by the protesters of 17 October who moved under the title “One of Unity” and cut the basic arteries in the country, consultations continue between the political forces to create a gap in the wall of the current crisis, However, no date has yet been set for the expected parliamentary consultations necessary to appoint a prime minister after the resignation of Prime Minister Saad Hariri.

Although behind-the-scenes consultations continue, it seems that the key node is that Bassil linked the departure of some political names to the departure of “all”, which could mean the possibility of naming a non-Hariri to form a technocratic government away from parties.

In this context, sources said the Free Patriotic Movement, on Wednesday, according to the Arab delegate, that Bassil made an offer to Hariri, a government that brings together representatives of political parties and representatives of the movement, and thus the outcome of the parliamentary elections and recent street demonstrations.

In return, Hariri insists on his refusal to impose any preconditions on him by the parties concerned.

Insurgents across Lebanon insist on adhering to the demand of an independent, impartial government of 12 ministers unconnected with traditional political parties, in order to embark on the required reforms and fulfill the demand for the recovery of looted funds. They assert that they will not get out of the squares until their demands are met, using the road-blocking paper to press the authority to expedite the demands.

Mustapha Alloush, a leader in the Future Movement, said that “insisting on positions by the PA will lead to three possibilities: the economic and financial collapse of the country, violence or Hezbollah’s take to the streets to set borders for its state within the state.”
At the other end of the spectrum, the Free Patriotic Movement (FPM) continues to respond to the call of the President of the Republic for dialogue to discuss their demands.

 

 

Reviewer overview

Moody's Lebanon's Rating - /10

Summary

Moody's downgraded Lebanon's rating to Caa2 on Tuesday as growing prospects for a debt rescheduling would categorize it as a default. Hariri-Basil meeting.

0 Bad!