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The Republic of Lebanon
acting through the Ministry of Finance ("MoF")
intends to raise funds through a Special Purpose
Vehicle ("SPV") domiciled in the Cayman
Islands.
The SPV will issue notes that will be secured by
the future flows generated from the duties on imported
tobacco products charged by the MoF on tobacco products
and paid by the International Tobacco companies.
Lebanon has imported an average $137 MM per annum
of tobacco products and generated $177 MM per annum
in tariff revenues between 1999 and 2002.
The main exporters of tobacco, Phillip Morris (A2
(Moody's) / A (S&P) (1) / A (Fitch)), BAT (A2
(Moody's) / A (S&P) / A (Fitch)), Japan Tobacco
(Aa3 (Moody's) / AA-(S&P)), and Atladis Group
(A3 (Moody's) / A-(S&P) / A-(Fitch)) to Lebanon
are estimated to collectively generate over 90%
of the total tariff revenues.
Note:
The proposed future flow transaction specifically
incorporates structural enhancements to pierce
the sovereign ceiling |
1- The Régie imports finished tobacco products
into Lebanon by placing orders with the International
Tobacco Companies (PM, BAT, Atladis Group, etc.)
on a FOB basis.
2- In order to clear the goods upon arrival,
the Régie pays the Customs Office the assessed import
duties in Lebanes pounds.
3- The Régie pays the International Tobacco
Companies for the invoiced goods (i.e., the tobacco
purchase price) as per the agreed payment terms.
4- The Régie sells the imported tobacco products
to its licensed distributors in Lebanon.
Note:
Legal Status
The Régie operates as a government-owned
company, which effectively has the monopoly
for the importation of tobacco into Lebanon
Current Primary Functions
Commercial
- To import
- To clear imported tobacco products from
customs and store them in its warehouses
- To authorize international tobacco and tombac
companies interested in marketing their products
on the Lebanese market
- To issue licenses to "chief distributors"
- To sell tobacco and tombac products to chide
distributors
- To sell on the local market or export local
production
Industrial
- Manufacture of local cigarettes
- Production of tobacco
Tobacco companies retain the responsibilities
to market their product
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Total Revenues for all
Tobacco Products
Tariff revenues have shown
a steady increase since 1997 with a CAGR(2)
of 8.5% between 1997 and 2001
The estimated drop in 2002 is due to the introduction
of VAT
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Customs and Excise Taxes
The Government has followed
a strategy of maximizing tariff revenues subject
to international trade agreements
The setting of customs and excise taxes takes
into account
- Maximising revenues
- Ensuring no leakage of imports through customs
- International trade agreements
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Customs and Excise Taxes
Stable revenue distribution
over the year
No significant seasonalities either on a 3
year or 5 year basis
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Total Import Units of
Cigarettes
Demand for tobacco products
is generally inelastic
- Total tariff rates were increased 120% in
April 1999. however, cigarette volumes dropped
by only 31% resulting in total tariff revenues
increasing by 50% relative to 1998
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Customs and Excise Taxes
1999
The flat revenues between
1999 and 2000 are not due to increase in tariffs
but to general economic conditions
- Tariffs in 1999 increases early in April
Total revenues for the first three months
of 1999 were $29,401,504 compared to a 3month
average of $42,340,455 for the remaining year,
or a 44% increase
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CIF Price of Imported
Units
Average price per unite
of imported cigarettes to Lebanon (CIF) from
1992 to year-to-sate 2002 is $172.71 and the
average number of Cigarette Units(1) is 81,615
The price is determined by the suppliers and
follows international supply and demand trends
and the specifics of the Lebanese market demand
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Stable Revenue Stream
From Imports
Largest International
Tobacco Manufactures
P3% of total customs and excise revenues
are generated from tobacco products
imported from well-rated international
companies:
- Philip Morris - rated A2 (Moody's)
/ A (S&P) / A (Fitch)
- BAT - rated A2 (Moody's) / A (S&P)
/ A (Fitch)
- Japan Tobacco - rated Aa3 (Moody's)
/ AA-(S&P)
- Altadis Group - rated A3 (Moody's)
/ A- (S&P) / A (Fitch)
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