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Fitch downgrades Lebanon’s rating to CCC, S&P delays, dollar bonds slump

S&P's delayed reaction to Lebanon's rating did nothing to boost confidence in the country

Fitch Ratings, one of the "Big Three” credit rating agencies in the world, has decided to downgrade Lebanon’s rating from B- to CCC S&P Global has told Lebanon's central bank governor and finance minister it will allow a six-month grace period The 2027 dollar denominated bond issue slumped by 2 cents in the dollar to trade at its lowest level, while the 2026 issue shed 2.4 cents to also reach a new low

S&P has delayed its expected rating of Lebanon top B- for 6 months but it could be for knots.

Fitch downgrades Lebanon

Fitch Ratings, one of the "Big Three” credit rating agencies in the world, has decided to downgrade Lebanon’s rating from B- to CCC, a media report said.

“Lebanese sides have been informed that the Fitch agency has finalized its report and downgraded Lebanon’s rating to the level of CCC,” al-Joumhouria newspaper reported on Friday.

Moody’s agency has already given Lebanon this rating.

Al-Joumhouria noted that a country’s overall rating is based on two out of three ratings by the big three rating agencies, which might render Standard & Poor’s rating that will was supposed to be issued on Friday as of no value.

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S&P delays

S&P Global has told Lebanon's central bank governor and finance minister it will allow a six-month grace period before deciding whether or not to downgrade the country's sovereign credit rating, Lebanese daily al-Akhbar said on Thursday without citing sources. 

Goldman Sachs, in an Aug. 16 week ahead note, said "the steady deterioration in Lebanon's FX liquidity position indicates a likely downgrade to CCC (by S&P), from a B-.

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Dollar denominated bonds deteriorate

Dollar-denominated bonds issued by Lebanon’s government didn’t wait for the actual S&P decision. They dropped to new lows on Tuesday on worries about the risk of a sovereign credit rating downgrade by S&P Global.

The 2027 issue slumped by 2 cents in the dollar to trade at its lowest level, while the 2026 issue shed 2.4 cents to also reach a new low, according to Tradeweb data, as reported by Reuters.

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said Giyas Gokkent, of JPMorgan Securities: “S&P has a negative outlook on Lebanon’s long term sovereign ratings and the central bank governor has said a downgrade could impact banks’ capital adequacy levels

Mounting worries about Lebanon’s finances saw S&P put the country’s B- rating on a negative outlook at the start of March. In anticipation of the move, the cost of insuring against a Lebanese sovereign default has also soared in recent days, with 5-year credit default swaps (CDS) quoted on Tuesday by IHS Markit at 1,096 bps.