A new facility arranged for the Trade Bank of Iraq (TBI) will allow commercial lenders to extend letters of credit (L/Cs) in Iraq that are not fully cash collateralised.

The US$70 million structured facility was arranged, structured and coordinated by Citigroup's Export and Agency Finance group.

Trust guarantee

Under the facility, the TBI's reimbursement obligations to confirming banks will be supported by a special trust. It will only however guarantee reimbursement obligations on TBI L/Cs that are not, or not entirely, supported by export credit agency cover.

This means that for the first time in recent history, L/Cs that are not fully cash collateralised can be used in transactions with Iraq.

Trade reconstruction

The new facility aims to increase the availability of financing for Iraqi trade transactions, enable Iraq to increase its funding capacity and allow it to re-enter the global financial community.

The facility follows Iraq's recent commercial debt restructuring, a prepaid L/C facility for TBI and the launch of a US$130 million Overseas Private Investment Corporation partially guaranteed loan to support Iraqi small- and medium-sized enterprises.

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