Iraq will seek $2 billion in financing for some of the 40 jetliners it has on order from Boeing Co. as the Middle Eastern country recovering from years of warfare taps U.S. export credit for the first time.
A committee drawn from Iraq’s transport and finance ministries, Central Bank and Iraqi Airways, which will use the planes, will be formed today to negotiate the funding, Deputy Transport Minister Bangen Rekani said in a telephone interview.
Citigroup Inc. will be invited next week to advise on the plan, Rekani said, with Iraq having relied on its status as the world’s fourth-largest oil exporter to fund the bulk of a Boeing deal worth $5 billion at current list prices. The Gulf nation ordered 30 737-800s in 2008, followed by 10 787-8 long-haul Dreamliners in 2009 and a single 777 in 2012, with three planes delivered to date and two more due in the next few weeks.
“We may delay some aircraft and make modifications on others,” Rekani said. “There’s a lot of discussion.”
The U.S. Export-Import Bank facility will be in the range of $1.5 billion to $2 billion, with the final amount depending on the agreed delivery schedule, he said, adding that he’s “cautiously optimistic” about securing a funding deal.
Though oil-rich, Iraq’s efforts to rebuild its economy 11 years after the U.S.-led invasion have been hobbled by political in-fighting and sectarian strife. Rekani said export credit offers the benefit of “guaranteeing payments and delivery” by avoiding budgetary delays as railways, ports and airports seek $50 billion in infrastructure upgrades.
Government export credit agencies, which stepped in to finance aircraft purchases after the 2008 credit crisis froze capital markets, are generally paring budgets. Such funding was expected to amount to about 20 percent of the $104 billion total in 2013, Kostya Zolotusky, Boeing’s managing director of capital markets and leasing, said July 11.
Iraq’s Council of Ministers says on its website that the go-ahead has been given for initial talks on Citi acting as an intermediary between Iraqi Airways and U.S. Ex-Im Bank, without specifying the size of the required loan or a time-line.
Citibank looks forward to discussing the matter with appropriate Iraqi officials in due course, it said in an e-mailed response to questions.
Iraqi Airways also has a letter of intent to purchase five CS300 CSeries narrow-bodies from Bombardier Inc. announced at November’s Dubai Airshow and worth $387 million at list prices, plus 11 options that would take the value to $1.26 billion.
“We need a lot of funds,” Rekani said. “We’re in a race to complete the maximum number of projects in a short time.”