Amadeusz Juskowiak

Iraq defers payments on 500 mln dlr euroloan

Iraq has secured agreement to defer outstanding payments on a 500 mln dlr syndicated euroloan following five months of negotiations with creditor banks

Banking sources said the rescheduling is part of Iraqs continuing effort to defer payments of foreign debt as its economy comes under strain from the Gulf War and soft world oil prices

Iraq informed the 37 banks in the loan syndicate last September it could not meet the remaining four principal repayments totalling 285 mln dlrs and missed the first of these for 7125 mln due on September 29

The 500 mln dlr credit under the lead management of Parisbased Union de Banques Arabes et Francaises UBAF has a fiveyear maturity and a margin of one percentage point over London Interbank Offered Rates LIBOR

Banking sources said the agreement now worked out goes some way to meeting creditor bank demands that at least part of the first missing instalment of 7125 mln dlrs be paid and not deferred

One quarter or 178 mln dlrs will be paid on signature of the accord expected in late March with the remainder in three more instalments to be made every six months

The remaining three principal instalments originally due in March 1987 September 1987 and March 1988 will each be deferred for two years from the due date banking sources said

The margin for the loan remains unchanged and no penalty interest is being imposed the sources added

Bank reaction to Iraqs rescheduling request has been one of resignation with many bankers seeing little alternative for Baghdads economic planners Iraq is estimated to have foreign debt of about 50 billion dlrs although about half is thought to be in the form of loans from its Gulf Arab allies particularly Saudi Arabia and Kuwait

The 500 mln dlr credit is in the name of the stateowned Rafidain Bank The only other major eurocredit a 500 mln dlr deal under the agency of Gulf International Bank was signed in October 1985 and is still in a two year grace period

The bulk of Iraqs commercial debt excluding loans by its allies in the Gulf War is in the form of trade financing

But Rafidain bank stopped paying debt due on letters of credit last March and a series of negotiations with banks and western government export credit agencies has been underway Some banks have agreed to a threeyear deferrment of obligations due on letters of credit