The board of directors of the Overseas Private Investment Corporation (Opic) has approved US$150mn in financing for a US trust facility established to support efforts by the new Trade Bank of Iraq (TBI) to rebuild the Iraqi economy.
Opic’s financing, which includes an initial US$70mn financing transaction coordinated by Citigroup, will guaranty financing by TBI to foreign exporters involved in reconstruction projects. By supporting the bank’s reimbursement obligations, the trust will facilitate the provision of goods and services vital to Iraq’s reconstruction after decades of international isolation.
Specifically, the trust will only guaranty reimbursement obligations on TBI letters of credit, which are not, or not entirely, supported by export credit agency cover.
Consequently, the project is designed 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 letters of credit that are not fully collateralised.
“Provision of trade finance for companies seeking to contribute to Iraq’s reintegration into the global economy will be key to Iraq’s reconstruction. By supporting the new Trade Bank of Iraq, which was created for precisely that purpose, Opic’s financing will accelerate Iraq’s reconstruction and involve increasing numbers of international companies in the process,” says Opic acting president and CEO Ross Connelly.
The Trade Bank of Iraq is an independent Iraqi government entity created to facilitate the reconstruction of Iraq by providing trade finance services that Iraqi financial institutions are currently unable to offer. The TBI, with capital of US$100mn, began its operations in December 2003.