S&P Downgrades Lebanon Bonds to Default after Missed Payments

Credit ratings agency S&P on Friday downgraded more Lebanese government debt issues after missed payments, citing the country's worsening economic crisis following the devastating explosion in Beirut earlier this month.

S&P Global Ratings maintained the "selective default" or "SD" rating for Lebanon's foreign debt, after the country first defaulted in March, but three more bonds were cut to "D" from "CC," the agency said.

"The recent catastrophic explosion in Beirut is deepening the country's economic crisis," S&P said in a statement. "A protracted political vacuum or weak new government could further delay policy reforms, external aid and debt restructuring negotiations."

The capital was ravaged by a massive explosion at Beirut's port on August 4 that killed 181 people and wounded thousands. That was followed by protests against the government, leading the cabinet to resign.

Still reeling from the deadly blast, the country also entered into a new coronavirus lockdown Friday after a string of record daily infections tallies.

"Even before these recent events, Lebanon had made limited progress in engaging creditors on debt restructuring negotiations," S&P said.

The IMF has been working with the government to try to reach an agreement on a new aid program that could undergird a debt restructuring and unlock billions more in aid.

Lebanon's government says it needs $20 billion in external funding, which includes $11 billion pledged by donors in 2018.

However, this "remains elusive as the key Lebanese political institutions and players are unable to agree on the causes and scope of the country's crisis." 

"Without a strong commitment to implement structural economic, fiscal and monetary reforms, and absent a policy anchor provided by an IMF program, we expect restructuring negotiations will be drawn out beyond 2020," the agency said.