Lebanon May Ask Banks to Buy Back Bonds Sold to Foreign Funds

(Bloomberg) -- Lebanese officials are considering asking local banks to buy back Eurobonds they sold to foreign funds, after the transactions gave outside creditors more leverage in a potential restructuring discussion if the government decides to default, former Finance Minister Ali Hasan Khalil said.

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Khalil, who was at a meeting Monday with bankers and officials to discuss whether to repay a $1.2 billion Eurobond due next week, said that one of the ideas discussed with lenders was to have them buy back “enough” debt to regain a majority of votes in restructuring talks, according to a statement carried by Al-Akhbar newspaper.

Lebanon needs the approval of 75% of bondholders of each Eurobond series to agree on restructuring terms.

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Local banks should buy back the bonds from their own funds and not use depositors' money because they also bear responsibility for Lebanon's crisis, according to the former minister, who's a close aide to Parliament Speaker Nabih Berri.

Khalil said he shares the opposition of the party he represents to repaying the debt.

To contact the reporter on this story: Dana Khraiche in Beirut at dkhraiche@bloomberg.net

To contact the editors responsible for this story: Lin Noueihed at lnoueihed@bloomberg.net, Paul Abelsky

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