According to market reports last week, the Lebanese state-owned tobacco monopoly, Regie Libanais des Tabacs et des Tombacs, is set to proceed with its long-awaited securitization, structured under the country's law No. 430. As it turns out, however, there are still a few kinks to be ironed out.

Lebanon enacted its law No. 430 specifically to address the use of securitization for the reduction of government debt. Under the law, which was enacted in 2002, the Lebanese Central Bank can maintain an account for the management, servicing and reduction of public debt. Special purpose vehicles are established by the ministry, which receives the proceeds of Lebanon's privatization initiative.

The tobacco deal, which could make it to the market before the end of October, aims to securitize over 60% of the tobacco monopoly's projected revenues. One obstacle that still remains, however, is the resolution of the legal status of the tobacco companies. According to market sources, the monopoly's previous grant for public service concession expired some time ago, without it being renewed, which could prove a hindrance when structuring the deal under the current law.

Some are skeptical that this will be resolved, and expect some delays before the deal finally makes it to market. "It seems that the investment bankers are still waiting for a decree that may or may not be enacted by the government; with the absence of this decree that will address the legal issues, no deal can be done," explained one industry source. "However, one of the investment banks was awarded the telecom securitization mandate in compensation of the tobacco one."

According to the latest newswire published by Bemo Securitization SAL (BSEC), the Lebanese government looks set to move ahead with the securitization of future flow cell phone revenues. "Some politicians fear that Lebanon would lose its main source of income if it sold all of the public sector to private companies while others encourage the sale of 60% of the cellular network to the private sector," sources at BSEC said. "An alternative to privatizing networks would be to securitize their revenues."

BSEC reported that revenues are estimated to be around US$500 million per annum and, over the next 20 years, the total revenue could total over US$10 billion. The government is expected to garner around US$5 billion from the securitization of these networks.

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