Iraq plans to sell $2 billion in bonds

Updated 19 April 2016
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Iraq plans to sell $2 billion in bonds

BAGHDAD: Iraq may go ahead with plans to sell $2 billion in bonds in the next three months, hoping that international aid will lower the cost of borrowing that derailed earlier plans to issue the debt, the governor of the Iraqi central bank said in a interview Tuesday in Baghdad.
Iraq would like to see the yield drop to 5 percent from the 11 percent investors originally demanded, Gov. Ali Al-Alak said. The sale could be managed by banks including Standard Chartered, Deutsche Bank and Citi, he said.
Iraq had called off a sale of US dollar-denominated bonds in October 2015 rather than pay the 11 percent yield. It revived those plans in December 2015.
Iraq last sold debt internationally in 2006, when it issued about $2.7 billion of bonds due in 2028 with a coupon of 5.8 percent. Those bonds now trade around 70 cents on the dollar, for a yield of 11.66 percent. Standard & Poor's rates Iraq's long-term credit at B-, six notches below investment-grade. But Iraq hopes to get $15 billion to $16 billion in loans over the next two years from the International Monetary Fund, the World Bank and members of the Group of Seven leading industrialized nations, Al-Alak said.
About $7 billion should come in between June and December, and Iraq may also get US and World Bank borrowing guarantees to cover the planned bond sales, he said.
The IMF said at the end of March said it might approve as early as June a standby arrangement unlocking $15 billion in international assistance over the next three years.
"Any progress" with the IMF "will give positive marks for the market that will help to deal with the bonds' issue," Al-Alak said.
"Besides, several guarantees from the US or the World Bank will help to reduce the interest rate," he said. "Five percent to 6 percent will be reasonable. If we can get this kind of guarantee, we might even get less than that."
Iraq is seeking international support after a collapse in oil prices two years ago caused its revenue to drop — the government relies on oil for 95 percent of its income.
With oil prices falling and the war intensifying, Iraq's economy shrank by 2.1 percent last year, the IMF said. Debt is expected to reach 77 percent of gross domestic product this year.
Iraq plans to implement measures to reduce spending and increase revenue by raising electricity prices and income taxes to facilitate an IMF loan of $6 billion by next June, the central bank governor said.
"There are a few items we have to work on right away," he said. "We have to get an approval from the council of the ministers as soon as possible, before June at least."
The country also hopes to get $4 billion from the World Bank and $3 billion to $5 billion at meeting of the G-7 due next month in Japan, he said. "There is good hope that we will get some support from that meeting — it is on their agenda," he said.


France’s Total has officially left Iran: oil minister

Updated 21 min 43 sec ago
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France’s Total has officially left Iran: oil minister

TEHRAN: French energy giant Total has officially quit its multi-billion-dollar gas project in Iran, Oil Minister Bijan Namdar Zanganeh said on Monday, following the reimposition of US sanctions.
“Total has officially left the agreement for the development of phase 11 of South Pars (gas field). It has been more than two months that it announced that it would leave the contract,” he told the ICANA news agency, which is linked to the oil ministry.
The United States said in May that it was abandoning the 2015 nuclear deal and reimposing sanctions on Iran in two phases in August and November.
The second phase will target Iran’s oil industry, and Total had already said it would be impossible to remain in Iran unless it received a specific waiver from Washington, which was not granted.