Moody's Investors Service ("Moody's") has today downgraded the Government of Lebanon's issuer ratings to Caa2 from Caa1. The ratings remain on review for downgrade.
The downgrade to Caa2 reflects the increased likelihood of a debt rescheduling or other liability management exercise that may constitute a default under Moody's definition since opening the review for downgrade of the Caa1 ratings at the start of October. Widespread social protests, the resignation of the government and loss of investor confidence have further undermined Lebanon's traditional funding model based on capital inflows and bank deposit growth, threatening the viability of the peg and macroeconomic stability.
The review period will allow the rating agency to assess the likelihood of a debt restructuring scenario that could lead to losses for private investors that are larger than is consistent with a Caa2 rating.