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Iran planning $300 million Eurobond issue

Middle East Economic Digest
October 29, 1999

Tehran is planning to return to international capital markets with an initial Eurobond of $300 million, according to Bank Markazi (central bank). The government has sent a proposal to issue the bonds to the majlis for approval, says Mohammad Jafar Mojarrad, vice-governor of the central bank.

"We are planning to return to international capital markets after a 20- year absence to secure and diversify our sources of hard currency," Mojarrad told an international conference in Tehran on 20 October.

Mojarrad did not give further details. But the bonds would be similar to the rial-denominated "national participation certificates" issued in recent years by state agencies and the central government. To comply with Islamic constraints, these certificates carry provisional returns and a profit-sharing element.

When and if the Eurobond issue is approved, officials will be seeking a favourable rating from international agencies, experts say. Moody's Investors Service of the US recently started rating Iran, giving it a low B rating, but some other agencies such as Standard & Poor's (S&P), also of the US, would first require an official request from Tehran.

Sharif Ghalib, director of sovereign ratings at S&P, said on 20 October that given Tehran's "huge requirements, what strikes me is that the amount is small". This suggests that Tehran has two aims: to send another signal that it wants to reintegrate in the world community, and to set a benchmark for future bond issues by non-government or quasi agencies, Ghalib said.


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