Lebanon will delay an initial public offering of shares in national carrier Middle East Airlines that was due by the end of this year because of unfavorable market conditions, Central Bank Governor Riad Salameh said.
“We need to have the proper market momentum,” Salameh said in an interview late yesterday at his office in Beirut. “There is no appetite, we have to be patient,” he said, adding: “We want to really take advantage of the right moment to do it.”
Salameh cited the Greek debt crisis and its impact on European economies, a drop in oil prices and the weak performance of Arab stock exchanges as reasons for the delay. The airline is owned by the Central Bank.
The Bloomberg GCC 200 Index of Gulf Arab stocks has gained 3.8 percent this year, after adding 10 percent in 2009, and oil prices are down about 7 percent in the same period. The European Central Bank dropped plans in May to withdraw emergency lending measures introduced to fight the global recession, as Greece’s debt crisis spread through Europe.
An announcement on who will manage the sale of a 25 percent stake in the carrier had been due by the end of June, once banks had completed due diligence. The carrier is valued at about $1 billion.
Salameh said talks are ongoing with the six banks, which he didn’t name, that have expressed an interest in managing the MEA sale.
Under the IPO plan, no investor will be allowed to own more than 1 percent, in order to guarantee broad ownership of the shares, which will be listed on Lebanon’s stock exchange.
“It is unfortunate that the listing of Middle East Airlines has been postponed,” said Nassib Ghobril, head of research at Byblos Bank SAL in Beirut. “It would have increased activity on the Beirut Stock Exchange, attracted institutional investors and encouraged privately held businesses to consider listing on the bourse, as well as sent a powerful signal to the international community that Lebanon is serious about implementing reforms.”
MEA dominated international passenger travel in the region before Lebanon’s 1975-1990 civil war. The carrier, founded in 1945, was rescued from bankruptcy by the government in 1996 and had a profit of $100 million last year. It serves 28 destinations with a fleet of 15 airliners that includes Airbus SAS A330 widebodies and A320-series short-haul planes.
Previous efforts to sell shares in the airline had been thwarted by the global financial crisis, internal political upheaval and a one-month war with Israel in 2006.