Standard Chartered in talks on US$2b Iraq bond sale

[DUBAI] Standard Chartered Plc is in talks with Iraq's Finance Ministry to take part in a US$2 billion bond sale this year after OPEC's second-biggest producer revived plans to tap international debt markets to finance its budget deficit.

The London-based bank is also holding talks with other government institutions about their financing needs, Andreas Meletiou, Standard Chartered's chief executive officer in Iraq, said in an interview on Tuesday in Beirut.

"We also want to partner with the Iraq government in their efforts to rebuild Iraq and assist in the modernization of the banking sector," Mr Meletiou said.

Iraq, grappling with tumbling oil prices and the war with Islamic State militants, may sell Eurobonds in the second half of this year, Finance Minister Hoshyar Zebari said in February.

Authorities also expect to receive about US$6 billion in aid from the International Monetary Fund and the World Bank this year, central bank chief Ali Al-Allaq said in a separate interview on Tuesday.

A planned sale was halted last year because investors demanded yields that the government deemed too high. Citigroup Inc, Deutsche Bank AG and JPMorgan Chase & Co had been working on that deal.

"We have been in discussions with the Ministry of Finance on its US$2 billion bond issuance , anticipated to take place in 2016," Mr Meletiou said.

The bank's main focus in Iraq is to serve international clients operating in the country's power, water, oil and gas industries, telecoms and infrastructure, he said. A plan for a third branch is on hold until the country's security and economy improve, he said.

The conflict with Islamic State, which captured swaths of northern Iraq in the summer of 2014, has destroyed economic infrastructure, disrupted trade and discouraged investment. The country is facing the "double shock" of war as well as the crude-oil price drop, and has "urgent" balance-of-payment and budget needs, the IMF said in January.

The Washington-based lender approved a staff-monitored program to pave the way for a possible loan. Under the program, Iraq must reduce its non-oil primary deficit.

"There are measures that have been agreed to so that Iraq can get this support," the central bank's Mr Al-Allaq said. "We believe we have implemented these measures in terms of controlling expenses and trying to increase revenue." He didn't give details.

Fitch Ratings issued its first assessment on Iraqi debt in August, assigning it the fifth-worst junk grade. Iraq is rated B- by Standard & Poor's, six levels below investment grade, on par with debt-laden Lebanon and Greece.

Iraq's US$2.7 billion Eurobonds due in 2028 have dropped this year, sending the yield up almost 50 basis points to 11.19 per cent as of 10.15 am in London, according to data compiled by Bloomberg.

BLOOMBERG