debt and debt markets_iv

Debt & Debt Markets - QIV 2007

1

DEBT AND DEBT MARKETS A Quarterly Bulletin of the Ministry of Finance Issue No. 3, Quarter IV 2007 HIGHLIGHTS 1 THE LEBANESE ECONOMY 1 OVERALL DEBT DATA 2 FOREIGN CURRENCY DEBT DATA 3 FOREIGN CURRENCY LOANS DATA 5 DOMESTIC CURRENCY DEBT DATA 6 LIST OF FORTHCOMING PUBLICATIONS 7

HIGHLIGHTS By the end of December 2007, gross public debt reached US$ 42.06 billion, registering an increase of 3.34%

over the end-September 2007 debt level. By end December 2007, local currency debt amounted to US$ 20.81 billion, increasing by 3.61% over the

end-September 2007 level. By end December 2007, foreign currency debt amounted to US$ 21.25 billion, increasing by 3.08% over the

end-September 2007 level. On October 4, 2007, Lebanon issued a US $400 million Eurobond that was placed directly with Banque Du

Liban (BDL). The transaction was issued through a reopening of the series 33 November 2010 6.875% cou-pon USD Eurobond.

On November 20, 2007, Lebanon issued a US $300 million Eurobond that was placed directly with BDL. The transaction was issued through a reopening of the series 45 August 2011 7.500% coupon USD Eurobond.

This quarter, the United Arab Emirates disbursed a US $300 million loan in three tranches, the first two tranches equaling US $200 million were received in November and the remaining US $100 million was re-ceived in December. This loan has a 20 year maturity with an amortized repayment structure beginning after a 5 year grace period and carries a concessional effective interest rate of 3.00%. The proceeds from the loan were used for budgetary support.

On December 5, Oman transferred $10 million to the Lebanese Government in fulfillment of the grant agree-ment signed on November 27 as part of its Paris III pledge. The grant proceeds were used for debt reduction.

This quarter, commercial banks swaped LL 1,532 billion worth of 60-month BDL-issued CDs earning 11.3% coupon they were holding in exchange for 60-month Treasury bills earning 11.5% coupon in two swap trans-actions . The swaps were executed on October 25 in the amount of LL 1,003 billion and November 22 in the amount of LL 529 billion.

THE LEBANESE ECONOMY CPI % change (1998 base year)

Source: Central Administration of Statistics Source: 2000-2003 are National Accounts Committee figures 2004-2006 are Banque Du Liban (BDL) figures 2007 Figures are as per latest BDL estimates

1.3%

-2.6%

5.6%

4.3%

2.3%

-0.9%

3.0%

1.7%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2000 2001 2002 2003 2004 2005 2006 QIII-2007

0

5

10

15

20

25

30

2000 2001 2002 2003 2004 2005 2006 2007

(bill

ion

US

$)

-4%

-2%

0%

2%

4%

6%

8%

GDP (at current market prices in billions of US$) Real GDP growth rate (%)

GDP and GDP growth


2

151%

166%

178%

171%

178%

168%168% 167%

-

5

10

15

20

25

30

35

40

45

2000 2001 2002 2003 2004 2005 2006 2007

(bill

ion

US

$)

135%

140%

145%

150%

155%

160%

165%

170%

175%

180%

185%

Gross Debt (in billions US$) Gross Debt to GDP (%)

OVERALL DEBT DATA

Gross Public Debt

Source: MOF, BDL Note: 2007 figures are based on BDL GDP estimate.

Source: MOF

Fiscal Performance

Source: MOF

Source: MOF

18.02 18.72 16.78 17.81 17.4919.33 20.04 20.81

15.5518.38

19.1320.33

21.25

9.607.18

14.58

0

5

10

15

20

25

30

35

40

45

Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07

Gross Domestic Debt Gross Foreign Debt

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

2002 2003 2004 2005 2006 2007

(in b

illion

US

$)

-45%

-40%-35%

-30%-25%

-20%-15%

-10%-5%0%

5%10%

15%

Total Deficit/Surplus (cash basis) Primary Deficit/SurplusTotal Deficit/Surplus as % of Total Expenditures Primary Deficit/Surplus as % of Total Expenditures

Historical Debt Evolution (in billions US$)

Public Debt(in billions of US$)

Dec 04 Dec 05 Dec 06end-QI 07

end-QII 07

end-QIII 07

end-QIV 07

Change QIII - QIV

% change QIII - QIV

% change YoY

35,875 38,464 40,365 41,180 39,781 40,700 42,060 1,360 3.34% 4.20%

17,493 19,331 20,036 20,787 19,550 20,086 20,811 725 3.61% 3.87%

7,066 7,752 6,360 6,967 5,477 6,248 6,005 (243) -3.90% -5.59%

8,106 9,373 10,937 10,525 10,490 10,245 11,175 930 9.08% 2.18%2,322 2,206 2,739 3,294 3,583 3,593 3,631 38 1.07% 32.57%1,451 1,623 2,198 2,718 3,057 3,087 3,181 94 3.05% 44.76%

18,382 19,133 20,330 20,393 20,231 20,614 21,249 635 3.08% 4.52%1,992 1,850 1,894 1,897 1,919 2,039 2,393 354 17.37% 26.37%

4,401 4,312 4,338 4,306 4,312 4,139 4,159 21 0.50% -4.13%

- - - - - 500 900 400 80.00% 11,732 12,424 13,532 13,540 13,449 13,288 13,247 (42) -0.31% -2.11%

257 269 288 373 273 369 272 (98) -26.39% -5.53%

- 278 278 278 278 278 278 - 0.00% 0.00%2,892 3,708 2,948 2,664 2,323 2,291 2,963 673 29.37% 0.52%

32,984 34,756 37,418 38,516 37,458 38,410 39,097 688 1.79% 4.49%

20,966 22,927 25,575 25,292 25,016 24,687 25,422 735 2.98% -0.60%58% 60% 63% 61% 63% 61% 60%

Source: Ministry of Finance, Banque du LibanNotes:

(2) Figures of Dec04 -Jan06 change because of exchange rate of Euro.

(5) Special Tbs in foreign currency (expropriation bonds)(6) Gross market debt equals gross debt less the portfolios of the BDL, NSSF, bilateral and multilateral loans, Paris II and Paris III related debt.

(3) Paris II related debt (Eurobonds and Loans) declined due to the re-profiling of debt held by Malaysia as part of that country's Paris III contribution and because of a payment of principal of 30M EURO on AFD debt in this month.

c. Paris III related debt (Eurobonds and Loans)(4)

e. Accrued Interest on outstanding Eurobonds

(1) The BDL has extended loans to EDL for the equivalent amount of US$ 300 million to purchase fuel oil. These loans are listed as Public debt as they are government guaranteed.

(4) Includes US$ 500 million Eurobonds issued to Malaysia, US$ 300 million loan from the UAE, and US$ 100 million RDPL from the IBRD.

b. Paris II related debt (Eurobonds and Loans)(3)

% of total debt

f. Special T-bls in Foreign currency(5)

Public sector depositsNet debt

Gross market debt(6)

d. Market-issued Eurobonds

Gross public debt

Local currency debt a. Central Bank (including REPOs and Loans to EDL to

finance fuel purchases)(1)

b. Commercial Banks c. Other Local Currency Debt (T-bills) o/w Public entities

Foreign currency debt(2)

a. Bilateral, Multilateral and Private sector loans

Local currency debt

49.8%

USD denominated

Debt43.6%

Other foreign currency debt

2.1%

Euro denominated

Debt

Gross Debt of $42.06 billion as of end-December 2007 (by currency composition)


3

FOREIGN CURRENCY DEBT DATA

Source: Credit Suisse

Yields for Republic of Lebanon Eurobonds and Comparables

(as of January 22, 2008)

Source: MOF

Source: Credit Suisse Note: This table is intended for general information purposes only.

Agency

Long termtenor rating

Short-termtenor rating

Outlook Long termtenor rating

Short-termtenor rating

Outlook

Fitch IBCA Ltd B- B Stable B-Moody's Investor Services Ltd B3 NegativeStandard and Poor's B- C Negative B- C Negative

Lebanon Sovereign Debt RatingForeign Currency Domestic Currency

4.00

5.00

6.00

7.00

8.00

9.00

10.00

11.00

2007 2009 2011 2013 2015 2017 2019 2021 2023Maturities

Yiel

d (%

)

Lebanon (B3/ B-/ B-) Brazil (B1/BB/BB-) Turkey (B1/BB-/BB-)Pakistan (B1/B+) Phillippines (B1/BB-/BB) Indonesia (B3/B+/BB-)Mexico (Baa1/BBB/BBB)

22-Jan-08Bid Ask Bid Ask Bid Ask

Lebanese IssuesEuroLEB 5.875 12 92.5 93.5 8.03 7.73 371 345US DollarsLEB 7.375 08 99 100 9.89 7.32 667 408LEB 10.125 08 101 102 8.15 6.23 501 309LEB 10.250 09 102.75 103.75 8.46 7.83 571 508LEB FRN 09 98.5 99.5 7.27 6.68 449 389LEB 7.000 09 97.25 98.25 8.6 8.01 582 522LEB 7.125 10 97.38 98.38 8.5 7.97 570 517LEB 7.875 11 98 99 8.57 8.22 556 521LEB 4.000 17 Av Life 80.5 81.5 9.09 8.78 549 518LEB 7.750 12 96.75 97.75 8.61 8.34 532 505LEB 8.625 13 99.5 100.5 8.74 8.5 532 509LEB 7.375 14 93.5 94.75 8.75 8.47 518 490LIEB 10.000 15 105.75 106.75 8.9 8.72 520 501LEB 8.500 16 97.75 98.75 8.9 8.72 508 490LEB 11.625 16 115.25 116.25 8.97 8.82 516 500LEB 8.250 21 94.5 95.5 8.97 8.83 472 458

Lebanon Secondary IssuesPrice Yield Z-Spread

Market-issued Eurobonds$13,247

63%

Accrued Interest on Eurobonds

$272 1%

Special T-bills in foreign currency

$278 1%

Bilateral, Multilateral and Private sector

loans$2,393

11%

Paris II related debt

$4,159 20%

Paris III related debt $900 4%

Foreign Currency Debt Outstanding US $21.25 billion as of end-December 2007

(in billions US$)


4


ISIN C

OD

EEurobond

Outstanding Am

ount (in original currency)

Num

ber of

tranchesC

urrencyC

oupon rateM

at. Date

mm

/dd/yyYears to M

aturity

XS0133469253

USD

750 MN

- Aug 2008750,000,000

1U

SD10.125%

08/06/080.60

XS0102480513

USD

650 MN

- Oct 2009

635,500,0002

USD

10.250%10/06/09

1.77X

S0200337979U

SD 1,265 M

N - M

ar 20101,065,000,000

1U

SD7.125%

03/05/102.18

XS0200329950

USD

600 MN

- Sept 2012600,000,000

2U

SD7.750%

09/07/124.69

XS0207128561

USD

625 MN

FRN

- Nov 2009

625,000,0001

USD

6 months U

S $ Libor + 3.25 %

11/30/091.92

XS0207129296

USD

425 MN

- Dec 2009

425,000,0001

USD

7.000%12/14/09

1.96U

S52238PAD15

USD

1000 MN

- May 2011

1,000,000,0001

USD

7.875%05/20/11

3.39X

S0192976834EU

R 225 M

N - M

ay 2009225,000,000

1EU

R7.250%

05/20/091.39

XS0128547147

USD

400 MN

- May 2016

400,000,0001

USD

11.625%05/11/16

8.37X

S0205838435U

SD 1,269 M

N - M

ar 2008869,000,000

2U

SD6.375%

03/12/080.20

XS0205838948

USD

700 MN

-Nov 2010

700,000,0001

USD

6.875%11/12/10

2.87X

S0219573051U

SD 250 M

N -M

ay 2008250,000,000

1U

SD7.000%

05/11/080.36

XS0222790841

USD

250 MN

- June 2008250,000,000

1U

SD7.375%

06/20/080.47

XS0222794249

USD

650 MN

- June 2013650,000,000

2U

SD8.625%

06/20/135.47

US52238PAJ84

USD

750 MN

- Jan 2016750,000,000

1U

SD8.500%

01/19/168.06

XS0250882809

USD

676.902 MN

- April 2014676,902,000

1U

SD7.375%

04/14/146.29

XS0250882478

USD

2,092.469 MN

- April 20212,092,469,000

3U

SD8.250%

04/12/2113.29

XS0250883013

EUR

324.542 MN

- Arpil 2012324,542,000

2EU

R5.875%

04/12/124.28

XS0263574112

USD

750 MN

- Aug 2011750,000,000

2U

SD7.500%

08/02/113.59

XS0263573817

USD

351.591 MN

- Aug 2009351,591,000

2U

SD7.500%

08/03/091.59

Eurobonds issued in the context of Paris III

XS

0312416000U

SD 300 M

N due July 2017

300,000,0001

USD

3.750%07/20/17

9.56X

S0312416778U

SD 200 M

N due July 2012

200,000,0001

USD

3.750%07/20/12

4.56Eurobonds issued in the

context of Paris IIX

S0160503347 U

SD 2,007.511 M

N - D

ec 20172,007,511,000

2U

SD4.000%

12/31/1710.01

XS0160456322

USD

950 MN

- Dec 2017

650,000,0001

USD

5.000%12/27/17

10.00X

S0160456322 U

SD 700 M

N - M

ar 2018700,000,000

1U

SD5.000%

03/07/1810.19

XS0169203048

USD

200 MN

- Mar 2018

200,000,0001

USD

5.000%05/27/18

10.41

5.92

7.12%W

eighted average coupon rate:

Average Time to M

aturity (in years, as of D

ec 31, 2007):

List of Outstanding Eurobonds

(values as of Decem

ber 31, 2007)


5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(bill

ion

US

$)

Principal maturities Coupon maturities


FOREIGN CURRENCY LOANS DATA

Source: MOF, BDL Total US$ 2.9 billion

Source: MOF

Bilateral and Multilateral Loans (concessional and otherwise)

breakdown by sector

Bilateral and Multilateral Loans (concessional and otherwise)

breakdown by currency (as of end-December 2007)

Total US$ 2.9 billion

Issue Date Series (Tranche)

Term (years) Maturity Date

Coupon Rate

IssuanceYield

Amount issued ISIN Code

20-Nov-07 45 (2) 4 2-Aug-2011 7.500 9.000 USD 300 MN ** XS02635741124-Oct-07 33 (2) 3 12-Nov-2010 6.875 9.375 USD 400 MN ** XS020583894820-Jul-07 47 5 20-Jul-2012 3.750 3.750 USD 200 MN * XS031241677820-Jul-07 46 10 1-Jul-2017 3.750 3.750 USD 300 MN * XS03124160006-Jul-07 17 (2) 10 1-Dec-2017 4.000 9.250 USD 137.511 MN ** XS0160503347

31-May-07 39 (2) 6 20-Jun-2013 8.625 8.750 USD 400 MN XS022279424926-Feb-07 42 (3) 14 12-Apr-2021 8.250 8.750 USD 431 MN** XS025088247826-Feb-07 32 (2) 1 12-Mar-2008 6.375 6.375 USD 569 MN** XS020583843527-Dec-06 44 (2) 3 3-Aug-2009 7.500 9.250 USD $145 MN** XS02635738172-Aug-06 44 3 3-Aug-2009 7.500 9.250 USD $206.591 MN** XS02635738172-Aug-06 45 5 2-Aug-2011 7.500 7.500 USD $450 MN** XS0263574112

Recent Government Eurobond Issuance

Euro36%

Kuwaiti Dinar18%

US Dollar35%

Other3%Saudi Arabian

Riyal3%

Islamic Dinar5%

Services8% Education

8%

Power10%

Health4%

Transportation11%

Social1%

Water18%

Budgetary support and other sectors (inlc. Paris

II AFD loan, and UAE and IBRD Paris III loans)

40%

* Paris III conference Malaysia contribution ** Initial Issuance to BDL

Foreign Currency Debt (Eurobonds, loans, and all others)

Amortization Schedule (breakdown as of end-December 2007)


6

DOMESTIC CURRENCY DEBT DATA

Source: MOF, BDL

Source: MOF, BDL

T-Bill Subscription Results by Holder During QIV-2007

October 2007 December 2007 November 2007

Source: MOF, BDL

-

1

2

3

4

5

6

7

8

9

10

QI-08 QII-08 QIII-08 QIV-08 2008 2009 2010 2011 2012

(bill

ion

US

$)

Coupon maturitiesPrincipal maturities (incl. discount interest for 3, 6, and 12 month T-bills)

1.61

Average Time to Maturityof Domestic Currency

T-bills and Notes

(In years, as of end-Dec 2007)

Auction Date Tenors to be auctioned (in months)4-Feb-08 3 MN, 6 MN9-Feb-08 12 MN11-Feb-08 24 MN, 36 MN18-Feb-08 3 MN, 6 MN23-Feb-08 12 MN25-Feb-08 24 MN, 36 MN3-Mar-08 3 MN, 6 MN8-Mar-08 12 MN10-Mar-08 24 MN, 36 MN17-Mar-08 3 MN, 6 MN22-Mar-08 12 MN24-Mar-08 24 MN, 36 MN

Upcoming Government Treasury Bill Auctions

Others1%

BDL17%

Public Institutions

12%

Banks70%

Others4%

BDL40%

Public Institutions

7%Banks49%

Others2%

BDL3%

Public Institutions

28%

Banks67%

Amortization Schedule of Domestic T-bills and Notes (in billions US$, as of Dec 31, 2007)


7

DOMESTIC CURRENCY DEBT DATA

Domestic T-bills Outstanding by Investor Type (December 31, 2007)

Source: MOF

LIST OF FORTHCOMING PUBLICATIONS

Source: MOF, BDL Source: MOF, BDL

F o r f u r t he r i n f o r ma t i on , p l e as e co n tac t : E c o n om i c U n i t , U ND P P r o j e c t R o l a R i z k , H e a d N a d in e A bo u Kh a le d G h a s s a n H i t t i L a Hak i m M i n i s t r y o f F i n a n ce T e l : 96 1 1 9 81 05 7 /8 F a x : 96 1 1 9 81 0 59 E ma i l : i n f oc e nt e r @f i n a nc e . go v . l b

Source: MOF

5.93

9.63

13.99 13.96

4.83

1.58

1.16 1.28

2.854.02

2.273.28

1.92

2.01

1.050.35

1.40

1.370.74

1.16

0.07

0.100.09

0.01

0

2

4

6

8

10

12

14

16

18

20

22

Dec 04 Dec 05 Dec 06 Dec 07

(bill

ions

US

$)

3 MN bills

6 MN bills

12 MN bills

Other longterm bonds

24 MN notes

36 MN notes

Domestic T-bills Outstanding by Tenor Type (December 31, 2007)

7.07 7.75 6.36 6.00

8.11

9.3710.94 11.18

1.45

1.62 2.203.18

0.87

0.580.54

0.41

0

2

4

6

8

10

12

14

16

18

20

22

Dec 04 Dec 05 Dec 06 Dec 07

(billi

on U

S$)

Others

PublicInstitutions

CommercialBanks

Central Bank

Publication Week of Release

Paris III Conference Fourth Progress Report 3rd week of January Note on 2008 Budget Proposal 3rd week of January Monthly Fiscal Performance for November 1st week of February Note on 2007 Budget Proposal 1st week of February Donor Coordination Newsletter for January 1st week of February Public Finance Monitor December 2nd week of February Quarterly Public Finance Report QIII 2007 nd week of February2 Donor Coordination Newsletter for February 1st week of March Annual Public Finance Report for 2007 1st week of April Debt and Debt Markets QI 2008 4th week of April

4%

5%

6%

7%

8%

9%

10%

Jan-0

8

Sep-0

7

May-0

7

Jan-0

7

Sep-0

6

May-0

6

Jan-0

6

Sep-0

5

May-0

5

Jan-0

5

Sep-0

4

May-0

4

Jan-0

4

Sep-0

3

May-0

3

Jan-0

3

Yields on 36month TreasuryBills



4%

5%

6%

7%

8%

9%

10%

11%

12%

3-month T-bills 6-month T-bills 12-month T-bills

24-months T-bills

36-month T-bills

60-month T-bills

Primary Market Rates for T-Bills (December 31, 2007)

Time Series of Primary Market Rates for T-Bills

debt and debt markets_iv

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