Bank of America (BofA) maintained its ''Market Weight'' recommendation on Lebanon's external debt, as it said that the implementation of meaningful reforms is essential to support the country's economic recovery and reconstruction, particularly with the backing of international financial assistance. It added that Lebanon's Eurobond prices have been supported by a reduction of geopolitical risks in the Middle East. It considered that Eurobond recoveries close to 25 cents on the dollar would require an optimistic nominal GDP path, in line with the upward revision of the International Monetary Fund (IMF) prior to the escalation of the conflict.  It added that Eurobond recoveries close to 25 cents on the dollar would require the adoption of an orthodox reform program with the restructuring of the public debt by the end of 2026; the addition of unpaid interest accumulated since default to the bonds' principal amount; and a stable environment following the May 2026 parliamentary elections.  Further, it said that the government has indicated that it aims to enact the banking sector's insolvency framework by the end of July 2025. It pointed out that internal disagreements persist about the composition of the Higher Banking Authority (HBA), which would be in charge of the banking sector's restructuring, as well as concerns about Banque du Liban's dominant role within the HBA. Also, it noted that Parliament is currently discussing a draft law that is not aligned with the IMF's conditions. It stated that the Council of Ministers should endorse the gap law, which allocates losses in the financial sector, after Parliament enacts the insolvency framework of the banking sector, before the approval of an IMF Staff-Level Agreement.  It stressed that any improved treatment of depositors must align with the debt sustainability analysis and leave sufficient room for a bondholder restructuring agreement. It considered that the timeline is tight for an IMF Executive Board level approval of a program and a potential debt restructuring by the end of 2025. As such, it said that it continues to see a maximum recovery value of 25 cents on the dollar in a best case scenario, which is why it maintained its ''Market Weight'' recommendation on Lebanon's external debt. BofA had a similar recommendation on the Eurobonds in January 2025. (ICE BEIRUT)

Fonte notizia: Byblos Bank, 14 - 19 July 2025