Iraq hopes to meet investors by the end of July to present plans for a $5 billion bond issue, the country’s finance minister Hoshiyar Zebari told Reuters on Monday.
The government has hired JP Morgan, Citibank and Deutsche Bank to arrange its first debt sale in nine years, to cover a budget deficit caused by low oil prices and its conflict with Islamic militants.
Iraqi officials met with the three banks and credit rating agencies Fitch Ratings and Moody’s Investors Service on June 16, Zebari said by telephone.
“We completed a very successful round of due diligence with the three banks and with the ratings agencies in Istanbul, and I think they are on board,” he said.
“We will start our roadshow I think end of July, or early August at the latest, and then we will issue them. So everything is on track.”
On April 30, Zebari told Reuters Iraq was seeking a credit rating before the bond issue. The issue would be released to the market in tranches, he said at the time.
Analysts believe it might be difficult for the market to absorb $5 billion of debt from Iraq in a short space of time. Obtaining a credit rating from a major agency would be one step towards market acceptance; Zebari did not elaborate on what other steps Iraq might take to make the deal attractive, or on the potential buyers of the bonds.
The country’s need for cash is acute; the government has projected a budget deficit of about $25 billion this year, in a budget of roughly $100 billion.
“They haven’t given a rating, but we answered all their questions and we wait for them to do their analysis and let us know,” Zebari said of the rating agencies on Monday. “But it’s an important step for Iraq.”
In early June, the International Monetary Fund reached an agreement with Iraq for a $833 million loan programme, a step towards increasing investor confidence.