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Anonymous ID: 62697f Feb. 19, 2020, 5:47 a.m. No.8183174   🗄️.is đź”—kun   >>3411

Lebanon’s Yields Hit 1,000% as Government Calls in Bond Advisers

 

A bond yield soars to more than 1,000%? It just happened with Lebanon.

 

The nation’s next maturing Eurobond, $1.2 billion of notes due on March 9, fell to a record low of 60 cents on Wednesday, sending the annualized yield to 1,290%. The Beirut-based Al-Akhbar newspaper reported Wednesday that the Lebanese government will formally ask financial and legal advisers how it should handle its Eurobonds, with a view to potentially restructuring them. Lebanon is reaching out to banks including Citigroup Inc., Rothschild & Co. and JPMorgan Chase & Co., the newspaper said. It didn’t say where it got the information.

 

Meanwhile, the International Monetary Fund is sending a team to Beirut between Feb. 20 and 23 to discuss Lebanon’s economic issues with government officials, spokesman Gerry Rice said. Since the bonds sunk into distressed territory, soon after the start of anti-government protests in October, investors have shifted their focus to recovery rates, with trades driven by prices rather than yields.

 

Still, the surge in yields is an indication of how concerned markets have become. Most of Lebanon’s other Eurobonds have fallen to below 35 cents, while its five-year credit-default swaps hover around 5,260 basis points, the highest in the world, according to data compiled by Bloomberg. The price of the March debt has tumbled more than 20 cents since the start of February.

 

While Lebanon has enough foreign-exchange reserves to service its external liabilities through 2021, the costs would be so high that this strategy is “politically unrealistic,” Fitch Ratings said this week. Lebanon will most likely have to restructure its debts as it will find it difficult to get external funding, according to Standard Chartered Plc. While authorities seem reluctant to request financial assistance from the IMF – they only want technical advice for now — a bailout program would be the best way of restoring confidence in Lebanon’s economic and financial outlook, the bank said. A devaluation of the currency, which has been pegged to the dollar since 1997, is increasingly likely if the nation fails to secure external funding of at least $10 billion this year, she said. The Lebanese pound trades around 2,400 per dollar on the black market, almost 40% weaker than the official rate of 1,507.5, according to local website lebaneselira.org.

https://www.bloomberg.com//news/articles/2020-02-19/lebanon-s-yields-hit-1-000-as-government-calls-in-bond-advisers

The IMF is drooling about now…

Anonymous ID: 62697f Feb. 19, 2020, 7:14 a.m. No.8183563   🗄️.is đź”—kun

China Prepares To Nationalize Systematically-Important HNA Group

 

he last time we looked closely at China's "big four" conglomerates, HNA, Anbang, Evergrande and Dalian Wanda, was back in lat 2017 in the context of the systemic risk (i.e. record debt) that these companies had accumulated as part of their tremendous offshore M&A spree in prior years which however came to a crashing halt once the companies were no longer able to issue cheap debt and pursue a ponzi strategy of buying up more companies, then using them as even more collateral for even more debt for even more M&A and so on. And while the systemic risk among these conglomerates declined in recent years, it still remained as a byproduct of the sheer size - measured by the number of people they employ as well as debt on the balance sheet - and may explain why according to Bloomberg, China is planning to take over, i.e., nationalize one of the most infamous of Chinese conglomerates, HNA Group, and sell off its airline assets "after the coronavirus outbreak hit the indebted conglomerate’s ability to meet financial obligations."

 

In other words, while zombie conglomerates such as HNA, Anbang, et al were on the cusp of collapse for the past three years, all it would take to tip them over into insolvency was a "black swan", or rather "black bat" event. Such as the coronavirus epidemic. Which left Beijing with little choice: nationalize the company, or let it fail and suffer the consequences as thousands of people are suddenly left without a job.

 

As Bloomberg further reports, the government of Hainan, the southern island province where HNA is based, "is in talks to take control of the conglomerate, which has been shedding assets after a global buying spree left it with one of the highest levels of corporate debt in China." Bloomberg sources said that in keeping with a model laid out for bail outs of insolvent banks, the HNA airline assets could be taken over later by other local companies.

 

The report also said that the takeover announcement could be made as early as tomorrow, though talks are ongoing and could be delayed or fall apart, the people said. The virus epidemic has killed more than 2,000 people, the majority of them in China, where it has crippled the world’s second-largest economy, shuttering stores, bringing factories to a halt and triggering a virtual shutdown of the airline industry. Since 2018, HNA has sold off tens of billions of dollars in assets including stakes in Hilton Worldwide Holdings Inc. and Deutsche Bank AG.

 

And speaking of Deutsche Bank, with a nearly 5% stake in the German lender, it remains unclear if HNA would be forced to liquidate this holding under after takeover, although judging by the kneejerk reaction lower, traders aren't willing to hang around and find out.

https://www.zerohedge.com/markets/china-prepares-nationalize-systematically-important-hna-group