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Huge oil reserves will help Iraq to find buyers for international bonds is preparing to release
3/24/15
Dubai / LONDON (Reuters) - despite the war waged by Iraq against insurgents organization «Islamic State» and falling oil prices that has plagued public Bmalith, still the country can rely on huge oil reserves to attract buyers to the first of its issuance of international bonds in nine years.
In the past week, Iraqi Finance Minister, Hoshyar Zebari, said in an interview that the central government is discussing with the bank «Citibank» and »Deutsche Bank» version potential bond dollar worth five billion dollars for five years, contributing Hsilthma in bridging the budget deficit.
It is believed a lot of fund managers that Iraq will fall short of selling such a huge amount of bonds at once, especially as he did not get a credit rating from one of the major agencies. The process of obtaining a credit rating that could take months.
It is true that the bond support specific oil revenues will boost investor demand, but the government did not say they would do so, may refuse to handcuff her hands in this way. So you may be offered a smaller version in the coming weeks, perhaps between $ billion and two billion.
But there is no doubt that Iraq still can enter the international debt market whenever he pleases. Oil Vahtiatath very huge, and his plans for the production of this oil is very ambitious, what makes it an attractive market for funds wanting exposure to political risk versus reap high returns.
And increased Iraq, the second largest producer in the Organization of Petroleum Exporting Countries (OPEC), its production to 3.4 million barrels per day in January from 3.05 million barrels a year ago.
Baghdad has said it aims to raise the total capacity to between 8.5 million and 9 million barrels per day by 2020.
Although this goal may be overly optimistic in light of security concerns and poor infrastructure and lack of liquidity and water, but the huge oil fields in Iraq, located in the southern region controlled by the Shiites to make them immune to the organization «Islamic State» relatively attacks.
The bet buyers of Iraqi bonds that production will increase in the coming years, enough to service its debts Iraq easily, even if fully implemented expansion plans.
Said Brian Carter, director of the conservative «Acadian» Asset Management in Boston «aspirations of the Iraqi oil production and high availability of a positive catalyst for the Iraqi debt.»
Refers trading in the secondary market for dollar-denominated bonds Iraqi maturing in 2028 to restore investor confidence in Iraq somewhat, after Thavthm on sale late last year with falling oil prices.
The yield on bonds jumped to a record high of 10.49 percent in mid-December from 7.2 percent in September, but it came down after that to 8.54 percent.
Usually yield rises with increasing sense of buyer Sindh inherent risk in the acquisition.
There are several factors behind this recovery. Iraqi government forces have made some gains in the face of the organization «Islamic state over the past few months, Baghdad is not directly exposed to the risk.
After reaching Brent crude to $ 45 a barrel of crude rose above $ 50 a barrel.
And put Zebari complex plan to address the projected deficit of $ 21 billion in this year's budget. The minister plans to take many actions, including the imposition of taxes on imports of cars and cards of mobile phones, providing two billion dollars by reducing the rewards of government employees who earn large salaries, collecting $ 1.8 billion using SDRs for Iraq from the International Monetary Fund.
If these steps have enabled the government to meet its obligations and increased oil production will be more of the state of public finances in the event of a lot better in a few years.
Iraq currently earns about $ 50 billion a year from oil exports. If oil prices stabilized, the production growth rate of 50 percent only Seder additional revenues of approximately $ 25 billion, enough to cover the deficit in the budget entirely.
Said Kevin Daly, portfolio manager at «Aberdeen» Asset Management, said the bond that Iraq intends to put forward would be attractive if involved a return around nine percent, and for ten years. The «There will be a demand for Iraq, but certainly will increase if they (the Iraqis) a credit rating.»
And the relationship between the Iraqi traded bonds and other emerging markets are very weak, including Iraq makes an attractive investment market for some money, especially with the approach of raising US interest rates, which adversely affect the emerging market bonds in general.
Fund managers noted also that the Iraqi traded bonds attractive price, compared with dollar bonds due in 2023 to Nigeria, which is facing major political and security problems, but its bonds are trading a yield at least 165 basis points (1.65 percent) from the Iraqi counterpart.
Said Sergei Dergachev, director of the Governor of emerging market debt in the «Union Investment Brivivondz» in Germany, that the chances of the great recovery of oil prices very low, while the chances of Iraq eliminate militants organization «Islamic State» almost non-existent.
But he added: «In times of very low returns, investors looking for credits with a reasonable return, even if there are risks».
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