Iraq in $22 Billion Commercial Claims Restructuring
January 23, 2006
Cleary Gottlieb represented the Republic of Iraq in a series of transactions during 2005 aimed at restructuring approximately $22 billion in commercial claims against Iraq and Iraqi public sector entities, dating from the Saddam Hussein regime. The most recent transaction in this ongoing effort was a debt-for-debt exchange offer made to Iraq’s larger commercial creditors. All of the creditors, holding reconciled claims totaling approximately $14 billion, agreed to exchange their claims for $2.7 billion in new U.S. dollar-denominated bonds and a $177 million multicurrency loan. The resulting net reduction of Iraq’s debt was equal to approximately $11 billion.
Cleary has advised Iraq since July 2004, when the firm was selected to aid in the restructuring of Iraq’s approximately $130 billion in external debt.
Cleary assisted Iraq in negotiations with the Paris Club group of bilateral creditors that led to an agreement in principle in November 2004 to cancel 80% of the roughly $40 billion of Iraq’s sovereign debt owed to Paris Club members. The remaining 20% is to be repaid over 23 years. The Paris Club is an informal group of creditor governments from major industrialized countries that meets on a monthly basis in Paris in order to agree with debtor countries on restructuring their governmental debts.
During 2005, Cleary assisted Iraq in the negotiation of bilateral implementing agreements with most members of the Paris Club, and it is expected that the remaining Paris Club bilateral agreements will be concluded in early 2006. Cleary also assisted in the negotiation of agreements on similar terms with a number of non-Paris Club countries during 2005, and additional agreements with non-Paris Club members are expected during 2006.
On July 26, 2005, Iraq proposed a comprehensive settlement of its commercial claims on terms comparable to those agreed with the Paris Club (in a net present value sense) .