P√Ωivi Munter
Financial Times
May 6, 2004

Two London-based companies specialising in illiquid emerging market debt have set up a committee to represent holders of unpaid Iraqi trade debt.

Exotix, a debt brokerage majority-owned by Icap, and GML International, an independent investment banking firm, have formed the Iraq Creditors Club (ICC) to reconcile, manage and reschedule claims from creditors outside the London Club, which represents banks.

The ICC estimates that this kind of debt – most of which consists of trade or construction claims – totals about $7 billion–$8 billion.

The club partners seek to standardise the documentation of the claims – held by creditors in some 40 countries – in order to facilitate the development of a secondary market in the debt.

GML International has previous experience in representing trade creditors of the former Soviet Union.

Stefan Pinter, director at GML, said: “We are motivated by our successes as a representative of holders of the Soviet Union’s foreign trade organisation debt. We reconciled the debts of more than 1,000 FTO creditors, representing more than $750m in debt.”

The ICC offers to represent creditors in return for a fee based on eventual recovery rates but restructuring agreements on the trade debt must be preceded by a deal on Iraq’s sovereign debt, which in turn requires an economic programme sponsored by the International Monetary Fund. These will become feasible after the June 30 handover of power from a US administration to an Iraqi regime.

ICC said Iraqi debts total about $122 billion. Although the country has vast energy resources, it is expected to get a substantial debt reduction as it emerges from Saddam Hussein’s rule.