January 05, 2006 |
|Bonds issued by Iraq’s new government became tradeable on Wednesday after Iraq’s finance ministry confirmed it would go ahead with an exchange offer to holders of commercial debts dating from Saddam Hussein’s era.|
The exchange will take place on January 19. The announcement means the bonds become tradeable in London in the so-called grey market on an “if-, as-and- when issued basis”. No reliable quotes were available.
About $2.7bn face value of bonds, and $175m in loans, will be issued in exchange for nearly $14bn in claims held by large commercial creditors. The bonds, maturing in 2028, carry an annual coupon of 5.8 per cent. Principal repayments on the bonds, callable at face value by Iraq, begin in 2020. A further $800m of such bonds may be issued to settle remaining claims.
The decision means the new government’s first interest payments to any foreign creditor – the first of the semi-annual bond coupon payments amounting to about $78m – will be to bondholders on July 15.
The first interest payments on the $175m in loans, which will pay interest at 50 basis points over Libor, will be delayed for three years to match Iraq’s treatment of the government creditors of the Paris Club. Holders of small claims totalling some $1.6bn have already been paid cash equivalent to 10.2 per cent of face value.
Emerging market specialists said the bond issue’s large size, with its possible inclusion in emerging market indices, may help bolster demand, but the low coupon meant it would initially trade at a discount to face value.
The exchange was arranged by Citigroup and JPMorgan.