The US government's Overseas Private Investment Corporation (OPIC) has approved a US$150 million in financing for a US trust facility that it says is established to support efforts by the new Trade Bank of Iraq (TBI) to rebuild the Iraqi economy.

The trust will only guarantee reimbursement obligations on TBI letters of credit (L/Cs), which are not, or not entirely, supported by export credit agency (ECA) cover - and OPIC's cover is strictly reserved for US participants in Iraq's reconstruction.

Reconstruction

The financing, which includes an initial US$70 million financing transaction coordinated by Citigroup, will guarantee financing by TBI to foreign exporters involved in Iraqi reconstruction projects.

By supporting the bank's reimbursement obligations, the trust aims to facilitate the provision of goods and services vital to Iraq's reconstruction.

More financing

The aim of limiting guarantees to transactions not fully or partially supported by ECA cover is to increase the availability of financing for Iraqi trade transactions and to enable Iraqi funds to be leveraged in a more efficient manner.

The trust represents the first time that commercial lenders like Citigroup are able to extend L/Cs that are not fully collateralised.

Operators

TBI is an independent Iraqi government entity created to facilitate the reconstruction of Iraq by providing trade finance services that other Iraqi financial institutions are currently unable to offer. The TBI, with capital of US$100 million, began its operations in December 2003.

OPIC's political risk insurance and financing aim to help US businesses of all sizes invest in emerging markets and developing nations worldwide. All G-8 nations and most developed countries have OPIC-like national agencies.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.