Moody's does not follow S&P, maintains Lebanon's C rating

Rating agency Moody’s is maintaining Lebanon’s sovereign rating at C with a stable outlook, unchanged since December 2023.

The local currency ceiling (which notably includes Treasury bills) remains at C, one notch above the sovereign rating.

In a ratings action published Tuesday night, the agency again estimated that losses for eurobond holders — dollar-denominated bonds issued by Lebanon on which the country defaulted in March 2020 — should exceed 65 percent, while weighing the reform momentum initiated by the government against persistent geopolitical risks.

"The stable outlook indicates that Lebanon’s rating is unlikely to change before debt restructuring is completed, given the scale of macroeconomic, financial and social challenges, as well as our forecasts of significant losses compared to original commitments," Moody’s stated.

The American rating agency, a member of the world’s dominant “big three,” has therefore not — for now at least — chosen to follow the lead of its competitor Standard & Poor's Ratings, which in August decided to partially raise the country’s rating for the first time since the onset of the crisis that brought down the financial system in late 2019.

S&P at the time factored in the Lebanese government’s 2024 resumption of coupon payments on its Treasury bills, which had been suspended since 2021.

This move boosted their rating from “CC” to “CCC,” with a stable outlook, while the rating for eurobonds remained at “SD” (selective default).

The country defaulted on its more than $30 billion in debt securities (nominal value as of March 2020), triggering a series of negotiations with the International Monetary Fund (IMF) that have yet to produce results.

Long stuck around 7 cents, eurobonds began to recover from autumn 2024, after the war between Hezbollah and Israel, which left the Shiite party weakened.

They saw another surge following the election of Joseph Aoun as president and the formation of Nawaf Salam’s government, which prioritized reforms.

"The eurobond market [traded only among holders] is seeing renewed interest from institutional investors betting on reforms and their impact on the debt restructuring," explains Marwan Barakat, head of research at Bank Audi. Prices have climbed to 24 cents, the highest level since the March 9, 2020 default, and have nearly quadrupled in a year.

Barakat added that a large number of foreign investors are currently visiting Lebanon, welcomed by delegations from Morgan Stanley, Goldman Sachs, and Jefferies, on the occasion of the Beirut One conference organized by Economy Minister Amer Bsat on Nov. 8 and 19.

As for ratings agency Fitch, it stopped rating Lebanon in July 2024 due to a lack of access to reliable information, but confirmed that its partial or restricted default (RD) rating has been in place since 2020.