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( Source of the document: ICC Digital Library )
Massive Iranian L/C fraud
Reports from Iran indicated that the authorities have detained several suspects in an alleged US$2.6 billion letter of credit fraud. However, there is some conjecture that the authorities' actions may be politically motivated. The Iranian authorities say they have uncovered a a suspected financial scam in which forged L/Cs were used to purchase assets. Fake L/Cs were allegedly even used to purchase the Khuzestan Steel Company, one of the largest steel producers in Iran. At the time of writing, at least 19 people had been arrested in the alleged fraud. Reports from Tehran suggested that the Central Bank of Iran had been ordered to remove the heads of Bank Saderat and Bank Saman. The head of Iran's biggest bank, state-owned Bank Melli, had reportedly already tendered his resignation. Iranian lawmakers were also threatening to impeach economy minister, Shamseddin Hoseyni. If convicted, some could face the death penalty.
Shortage of L/Cs in Yemen
Unwillingness on the part of foreign suppliers to sell to Yemeni customers on letter of credit terms is one of several problems faced by the country's steel producers. Shipping and other activities in the country have also been adversely impacted by difficulties in the L/C market as Yemen struggles to cope with popular protests and an indigenous Al-Qaeda wing. Suppliers of Aden Steel are no longer prepared to do business with the Yemeni company on L/C terms, according to a senior manager at the country's largest steel mill. He says the suppliers lack confidence in the firm's ability to meet its commitments, and the company now has to pay cash up front for all its supplies. Anti-government protests, compounded by Al Qaeda attacks, have severely depressed the Yemeni steel market over the last several months. Another negative impact of the unrest in Yemen is a US dollar shortage, which makes L/Cs harder to come by.
Bank guarantees in Nigeria
Bank guarantees from commercial banks are becoming much more popular as a financing instrument in Nigeria, according a senior officer at the country's oldest and largest development financing institution. Sonny Ekedayen, who heads the Lagos zonal office of the Bank of Industry (BoI), presented this view at a recent forum organized by the Academy for Entrepreneurial Studies in Lagos. Ekedayen reckons that most Nigerian commercial banks now readily provide guarantees to long-term customers who have a good credit history. Some customers, however, are still required to provide collateral for the bank to provide a guarantee, he added. The BoI does not itself provide bank guarantees but it does fund the commercial banks that offer them. The BoI mainly funds asset purchases, typically of plant and machinery.
Solar project in California
The developers of a solar power project in the US state of California have closed a US$935 million financing that includes L/C funding. The project sponsored by NextEra Energy Resources subsidiary, Genesis Solar, also secured the support of the US Department of Energy's (DOE's) loan guarantee programme. Construction and term financing for the 250MW Genesis solar project consists of US$702 million in project bonds, a US$150 million project term loan facility and an US$83 million project L/C facility. The DOE has provided a loan guarantee of 80 per cent of the principal and interest on the project bonds and project term loan under its Financial Institution Partnership Program. Credit Suisse is the lender of the project term loan and applied for the DOE's loan guarantee.
Eurozone exposure for major Indian bank
State Bank of India (SBI) has announced that L/Cs and bank guarantees feature in its exposure to eurozone institutions. The country's largest lender says it has a US$353.6 million direct exposure in the European countries that use the euro. The bank says the L/Cs and bank guarantees have been provided to several European institutions to finance Indian exports and imports in the eurozone area. The SBI has underlined that it is not exposed to sovereign bonds in the region.