denotes premium content | Jan 6 2009 
Feature
posted 23 Feb 2005 in Volume 8 Issue 4
Tifa, Iraq: A taste of things to come
MLA & underwriting/lending participants: JPMorgan Chase; US Ex-Im Bank
Borrower/s, plus ultimate parent: State Company for Marketing Drugs and Medical Appliances, Iraqi Ministry of Health
Financial advisers: JPMorgan Chase; Trade Bank of Iraq; US Ex-Im Bank
Deal size: $14.95m LC
ECA: US Ex-Im provided 100% coverage of political and commercial risk
Tenor and payment schedules: Sight LC
Signing, closing and disbursement dates: LC issued April 2004
Last year, JPMorgan led a consortium of 14 banks that won the contract to establish and operate the Trade Bank of Iraq (TBI), a deal which received the 2003 TFR ‘mandate of the year’ award (see TFR, February 2004, p20). This time round it’s being recognised for its involvement in the first transaction set up under the framework agreement between the Trade Bank of Iraq, the Coalition Provisional Authority (CPA) and US Ex-Im Bank.
In contrast to LCs previously issued by one of the banks in the JPMorgan operating consortium at the Trade Bank’s request, this was the first LC issued by TBI and confirmed by JPMorgan based on the US Ex-Im insurance policy.
US company Tifa had been pursuing a contract for $14.95m for the sale of 200 insect abatement aerosol fogging machines to the Iraqi Ministry of Health since 1997. Originally considered under the UN Oil for Food programme, the contract had stalled until earlier this year, when it surfaced as a potential candidate for support from US Ex-Im during meetings in Baghdad with Ex-Im vice chairman April Foley. JPMorgan advised Tifa on the structure of the transaction, available risk mitigation, and the process and procedures related to working with TBI.
“Providing export-credit insurance is a demonstration of global support for Iraq and is a first step to expand the availability of credit for Iraqi importers,” says Jo Morrison, vice president, trade services, JPMorgan Chase. “The US Export Import Bank led the way for 19 export credit agencies to provide in excess of $2.2bn of credit for Iraq.”
TBI was formed in July 2003 under the CPA to provide financial and related services facilitating international trade in Iraq. When it opened officially in December 2003, it used an operating consortium of international banks led by JPM to issue or confirm new letters of credit. The consortium has continued to provide the bank with systems and back-office support, liaising closely with TBI and Iraqi importers and exporters.
The Trade Bank’s first year of growth has been impressive – to date 900 LCs, totalling close to $3.5bn, have been issued to exporters in 59 countries. There has also been an increase in the number of participating banks that assist the consortium, with HBV, ING, Development Bank of Singapore, Bank of China, Woori Bank of Korea, Vneshtorgbank and State Bank of India recently joining the group. TBI has also expanded its trade-finance capabilities, moving beyond commercial LCs to offer bid and performance bonds, payment guarantees, and export credit agency-supported transactions.
