Iraq is planning meetings with investors in Europe and the U.S. as the rout in crude prices pushes the nation toward tapping international bond markets for the first time in almost a decade.
The Gulf nation, which depends on oil for the bulk of its export revenue, mandated Citigroup Inc., Deutsche Bank AG, and JPMorgan Chase & Co. to organize the meetings beginning on Sept. 10, according to a person familiar with the matter. A dollar bond offering of at least $500 million may follow, said the person, who is not authorized to speak publicly and asked not to be identified.
The government, which announced a $6 billion bond program last month, is borrowing to close a budget shortfall as the fight against the Islamic State and oil’s 52 percent decline in the past year sap state finances. Yields on Iraq’s bonds due 2028 have soared over the period, and Tuesday reached 9.34 percent -- the highest since 2009.
“The political risk in Iraq would still be very high for most investors to accept,” Edward Bell, an analyst at Dubai-based bank Emirates NBD PJSC, said by e-mail. Security risks and doubts about “policy continuity and transparency would be a big concern for investors,” he said.
The securities will be rated six steps below investment grade by Standard & Poor’s, or B-, the ratings company said Tuesday. The country’s outlook is challenging because of its war with the Islamic State, fledgling political institutions, and ethnic divisions, S&P said in a report Sept. 3.
An increase in oil production, which accounts for 90 percent of government revenues and 95 percent of exports, will help boost Iraq’s economic growth to an average 5.7 percent between 2016 and 2018 from an estimated 0.3 percent this year, said S&P.