Expect more Iraq debt reduction through settlements

[DrCashflow]

July 26, 2005 10:13 AM US Eastern Timezone

Iraq Announces Terms of Commercial Debt Settlement Offer

http://home.businesswire.com/portal/site/moreover/index.jsp?epi-content=GENERIC&newsId=20050726005626&&newsLang=en&beanID=1868105982&viewID=news_view

Cash and Debt Swap Options based on eligible claim amount.

Cash

"The cash purchase price for reconciled eligible claims held by claimants eligible for the cash buyback will equal 10.25% of the reconciled outstanding amount of those claims..."

The Debt-for-Debt Exchange Offer

"For claimants holding an aggregate amount of eligible claims above the U.S. $35 million threshold referred to above (as of August 6, 1990), Iraq expects to make an offer to exchange the reconciled eligible amount of those claimsIraq currently anticipates making this debt-for-debt exchange offer in the fourth quarter of 2005 following the signing of a standby arrangement with the International Monetary Fund."

Based on current market conditions, both the syndicated loan and the privately placed bond will have a net present value comparable to the Paris Club financial terms and to the level of the cash buyback price.

[atxdinardude]

Dr C,

While I'm not sure what all of that means, for sure. (I did go to the link, and my small mind couldn't handle all of the big words)
It looks to me like there's going to be substantially more debt reduction in the near future.

And that ain't a bad thing

Thanks for the info.

[sprtbuf]

This is VERY good news and falls in place with the needed reduction for the opening. I recall reading about the reduction being more than initially announced. Is this confirmation about that information?

[atxdinardude]

I thought it was good news. As I read the link, there were several things that eluded my mental grasp. Anybody know what LIBOR is? And what exactly is the Paris Club?

[bottlebush]

I thought it was good news. As I read the link, there were several things that eluded my mental grasp. Anybody know what LIBOR is? And what exactly is the Paris Club?
LIBOR:# The rate charged by one bank to another for lending money.

[atxdinardude]

Thanks bottlebush

[Big Daddy Dinar]

I thought it was good news. As I read the link, there were several things that eluded my mental grasp. Anybody know what LIBOR is? And what exactly is the Paris Club?

LIBOR is the London InterBank Offered Rate, a common lending benchmark.

Interesting reading, DrCashflow. This shows just how on top of Iraq's financial situation the financial advisers representing Iraq are.

[eosirl2]

LIBOR:# The rate charged by one bank to another for lending money.

London Interbank Offered Rates

[atxdinardude]

Thanks, everybody.

I'm feeling smarter already.

[BIG WAVE]

July 26, 2005 10:13 AM US Eastern Timezone

Iraq Announces Terms of Commercial Debt Settlement Offer

http://home.businesswire.com/portal/site/moreover/index.jsp?epi-content=GENERIC&newsId=20050726005626&&newsLang=en&beanID=1868105982&viewID=news_view

Cash and Debt Swap Options based on eligible claim amount.

Cash

"The cash purchase price for reconciled eligible claims held by claimants eligible for the cash buyback will equal 10.25% of the reconciled outstanding amount of those claims..."

The Debt-for-Debt Exchange Offer

"For claimants holding an aggregate amount of eligible claims above the U.S. $35 million threshold referred to above (as of August 6, 1990), Iraq expects to make an offer to exchange the reconciled eligible amount of those claimsIraq currently anticipates making this debt-for-debt exchange offer in the fourth quarter of 2005 following the signing of a standby arrangement with the International Monetary Fund."

Based on current market conditions, both the syndicated loan and the privately placed bond will have a net present value comparable to the Paris Club financial terms and to the level of the cash buyback price.

Reading over an earlier post by DRC..........
...I noticed....

In connection with the announcement of this offer, Iraq also announced that the claims registration process would be reopened to allow claimants to register with Ernst & Young (the first step in the claims reconciliation process) any eligible claims that have not previously been submitted to Ernst & Young or included in a submission by one of Iraq's governmental creditors. This reopening period will expire at the close of business in London on August 8, 2005.


Iraq expects to make an offer to exchange the reconciled eligible amount of those claimsIraq currently anticipates making this debt-for-debt exchange offer in the fourth quarter of 2005 following the signing of a standby arrangement with the International Monetary Fund."

DRC never came back with an explaination, but I figure its viable information.
Maybe its a reach, but could that fall in line with an early August peg?....

[icarusII]

July 26, 2005 10:13 AM US Eastern Timezone

Iraq Announces Terms of Commercial Debt Settlement Offer

http://home.businesswire.com/portal/site/moreover/index.jsp?epi-content=GENERIC&newsId=20050726005626&&newsLang=en&beanID=1868105982&viewID=news_view

Cash and Debt Swap Options based on eligible claim amount.

Cash

"The cash purchase price for reconciled eligible claims held by claimants eligible for the cash buyback will equal 10.25% of the reconciled outstanding amount of those claims..."

The Debt-for-Debt Exchange Offer

"For claimants holding an aggregate amount of eligible claims above the U.S. $35 million threshold referred to above (as of August 6, 1990), Iraq expects to make an offer to exchange the reconciled eligible amount of those claimsIraq currently anticipates making this debt-for-debt exchange offer in the fourth quarter of 2005 following the signing of a standby arrangement with the International Monetary Fund."

Based on current market conditions, both the syndicated loan and the privately placed bond will have a net present value comparable to the Paris Club financial terms and to the level of the cash buyback price.

I know this is an old post....but I never really looked at the terms of the deal outlined in the link. WOW.......WHAT AN EYE OPENER!!!!!!! The remaining Iraqi debt will be paid off through either a Cash Purchase agreement or Debt for Debt Exchange program at a drastically reduced rate and will eventually pump capital into their economy through claimant investment. Once the standby agreement with the IMF is finalized in the fourth quarter of 2005, Iraq will begin negotiating the debt claims. Check out the terms and repayment dates.

Icarus

[H2OLover]

I know this is an old post....but I never really looked at the terms of the deal outlined in the link. WOW.......WHAT AN EYE OPENER!!!!!!! The remaining Iraqi debt will be paid off through either a Cash Purchase agreement or Debt for Debt Exchange program at a drastically reduced rate and will eventually pump capital into their economy through claimant investment. Once the standby agreement with the IMF is finalized in the fourth quarter of 2005, Iraq will begin negotiating the debt claims. Check out the terms and repayment dates.

Icarus
I just started to read the artical in the link but stoped at the first sentance. Has Iraq always been the "Republic of Iraq" ??

Great article wonder if someone might be able to break it down a bit for those who are struggling a bit like myself. I am not sure i understand what i am reading ..thanks

[Dinars2Dollars]

Iraq expects to make an offer to exchange the reconciled eligible amount of those claimsIraq currently anticipates making this debt-for-debt exchange offer in the fourth quarter of 2005 following the signing of a standby arrangement with the International Monetary Fund."

A peg before the 4th qtr (read: by Aug 22) sure would make this a less expensive obligation. :D

[icarusII]

Iraq Announces Terms of Commercial Debt Settlement Offer

The total amount of Saddam-era claims against Iraq held by both commercial and bilateral creditors has been estimated at more than $125 billion. Of this amount, commercial creditors are believed to hold claims totaling approximately $20 billion, although firm figures will not be known until the reconciliation process is complete.

The Cash Offer
“Iraq expects to make a cash buyback offer to the holders of smaller aggregate amount of U.S. $35 million or less (or its equivalent in other currencies).
The cash purchase price for reconciled eligible claims held by claimants eligible for the cash buyback will equal 10.25% of the reconciled outstanding amount of those claims
Holders electing to tender their reconciled claims pursuant to Iraq's Invitation will agree, in return for a cash payment of the purchase price, to the full cancellation and discharge of all amounts due in connection with the tendered claims.
Closings of the cash offer are expected to occur periodically during 2005 and early 2006”

For any reconciled claim filed with Ernst & Young less than 35 million USD, Iraq will make a cash payment offer at 10.25% of the total amount to settle the claim. The claim settlement period will end in early 2006.
One sweet deal for Iraq! Iraq will pay 10% of the amount owed now…if they will close the claim.

Icarus

[icarusII]

The Debt-for-Debt Exchange Offer

For claimants holding an aggregate amount of eligible claims above the U.S. $35 million threshold, Iraq expects to make an offer to exchange the reconciled eligible amount of those claims (principal plus calculated interest accrued through the date of exchange) for two new debt instruments: a syndicated loan or a privately-placed bond. The loan will mature in January 2028, with a principal grace period lasting until July 2011. Principal amortizations of the new loan will commence, in equal semi-annual installments, in July 2011.

The privately placed bond will also have a maturity of January 2028, but will be exchanged at a 20% exchange ratio (that is, for each $100 reconciled amount of tendered eligible claims, including calculated interest accrued through the date of exchange as described above, the tendering holder will receive a new bond with a $20 face value). Principal amortizations of the new bond will commence, in equal semi-annual installments, in July 2020.
Iraq currently anticipates making this debt-for-debt exchange offer in the fourth quarter of 2005 following the signing of a standby arrangement with the International Monetary Fund.
Iraq will consider putting in place a program that would allow the conversion of the new debt instruments issued in this exchange into equity in Iraqi investments.
For any claim in excess of 35 million USD, Iraq will offer to exchange the claim amount for either a syndicated loan or a privately placed bond. Terms of the payments will be biannual payments beginning in 2011 and end by 2028. Iraq will begin these offers after signing the standby arrangement with the IMF in the fourth quarter of 2005. The exchange rate will be 20% of the reconciled amount.
We’ll give you 20% of the amount we owe if you let us put off the payments until 2011 and finish paying by 2028. To sweeten the deal, we’ll possible put an investment program in place where you can invest in Iraq with the money we pay you.

Icarus