LONDON, March 26 (Reuters) - Lebanon's bondholders have hired U.S. investment bank Houlihan Lokey as financial adviser for eventual debt talks, two sources familiar with the situation told Reuters.

Lebanon has been engulfed in a severe economic crisis since 2019, when its financial system collapsed under the weight of massive state debts, which prompted a sovereign default in 2020.

In early February, the country formed a new government with Nawaf Salam as prime minister, spurring hopes that the country might make progress to emerge from its protracted default.

Houlihan declined to comment.

Half a dozen firms pitched to the ad hoc group of bondholders in a process that saw Houlihan and GSA shortlisted, according to one of the sources.

Lebanon has Eurobonds with a face value of $31.3 billion outstanding. The debt trades at deeply distressed levels of around 16-17 cents in the dollar, according to Tradeweb data.

(Reporting by Karin Strohecker, Libby George, Marc Jones and Anousha Sakoui; Editing by Sandra Maler)

((karin.strohecker@thomsonreuters.com; +442075427262; Reuters Messaging: karin.strohecker.reuters.com@reuters.net))