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Iraq settles $1.2 bln in Saddam-era commercial debt
10/09/2008

Iraq has settled $1.2 billion in outstanding Saddam-era commercial claims against the Iraqi government and public sector after concluding a debt buyback programme, it said on Wednesday.

Iraq opened this latest commercial debt buyback programme in January 2008 and said it would qualify claimants for a cash buyback of 10.25 percent of the outstanding amount, including principal and accrued interest.

The terms of the programme were "substantially similar to those of Iraq's previous cash settlement offers," Iraq's Ministry of Finance said in a statement, adding they were comparable to the terms of Iraq's 2004 Paris Club deal.

The latest programme brings total commercial debt claims settled by Iraq to $20.9 billion, the finance ministry said.

It said 85 claimants participated in this offer, bringing the total number of claimants to 576 since Iraq's first buyback programme launched in 2005 for commercial claims from the era of Saddam Hussein, overthrown by the U.S.-led invasion in 2003.

Iraq restructured commercial claims to launch $2.7 billion worth of sovereign bonds in January 2006.

The bonds mature in 2028 but start to pay back the principal from 2020. The bonds began trading at 69 cents on the dollar and fell as far as 55 cents last year, but have since recovered to 73 cents <462652AA6=RRPS>, boosted by increased confidence over Iraqi security and the economy.

Iraq has also settled debt with 58 countries, the finance ministry said in Wednesday's statement.

The United Arab Emirates waived $7 billion of Iraqi debt in July, and Kuwaiti media have said Kuwait may forgive Iraq's $15-16 billion debt.

Investors have been looking for settlement by Middle Eastern countries of Iraqi debt to provide a further boost to the Iraqi economy.

The Paris Club of 19 rich creditor nations agreed in 2004 to write off 80 percent of its $40 billion debt to Iraq, and Russia wrote off most of Iraq's $12.9 billion debt earlier this year.

Analysts expect the remaining 20 percent of the Paris Club debt to be written off at the end of this year, with non-Paris Club countries following suit.

"There are two major stories for investing in Iraq -- one is oil and the other is the Paris Club restructuring," said Turker Hamzaoglu, economist for Middle East and North Africa at Merrill Lynch, which recommends an overweight position in Iraqi debt.

Hamzaoglu calculates Iraq's debt to GDP ratio falling to 36 percent next year from 160 percent, due to debt restructuring and increased domestic growth.

Iraq settles $1.2 bln in Saddam-era commercial debt - Source

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