March 2, 2020 / 2:58 PM / a month ago

UPDATE 2-Lebanon's advisers yet to reach deal with bondholders - source

(Adds central bank governor comment on gold reserves)

BEIRUT, March 2 (Reuters) - Lebanon's financial and legal advisers are in talks with holders of its dollar-denominated debt about restructuring but have not reached a deal, a source close to the government said on Monday.

The country is widely expected to restructure the sovereign bonds after a long-brewing economic crisis, which came to a head last year as capital inflows slowed and protests erupted against Lebanon's ruling elite over corruption and bad governance.

Lebanon has said it will announce a decision this week regarding its Eurobonds, which include a $1.2 billion issue maturing on March 9 and others that mature in April and June.

Central bank Governor Riad Salameh said after a meeting between Lebanon's prime minister, finance minister and banking association that it was out of the question to "touch" gold reserves to repay Eurobonds, MTV quoted him as saying.

Salameh told reporters the Eurobond decision was ultimately the government's to make and not his, the broadcaster reported.

Lebanon has nearly $15 billion in gold reserves, according to the central bank's website.

Beirut appointed investment bank Lazard and law firm Cleary Gottlieb Steen & Hamilton last week as its financial and legal advisers on the widely expected debt restructuring.

"They are working day and night" to reach an agreement on an orderly restructuring, the source said, adding that Lebanon's decision on the March 9 Eurobond must be announced by March 7.

Emerging markets investment manager Ashmore Group has attracted attention in Lebanon for accumulating more than 25% of the $2.5 billion of sovereign debt maturing in 2020, including the Eurobond maturing on March 9, according to sources citing Bloomberg News data up to the end of 2019.

Former finance minister Ali Hassan Khalil, a senior official in the Amal Movement of Parliament Speaker Nabih Berri, said he was against repaying the debt and interest at the expense of depositors.

Writing on Twitter, Khalil rebutted a report in al-Akhbar newspaper which said he had proposed the idea of making $8 billion available to pay off the debt.

"We were and remain committed to the option of not paying the bonds and their interest (if that is) at the expense of depositors' rights," he said.

Banks are imposing tight restrictions on access to deposits and transfers abroad, while the Lebanese pound has weakened by nearly 40% from its officially pegged rate. (Reporting by Samia Nakhoul; Writing by Tom Perry; Editing by Alexander Smith, Mark Heinrich and David Clarke)

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