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Iranian deal overcomes aura of evil

Issuer: Bank Markazi Iran (central bank)Amount: e500 millionLaunched: July 10 2002Bookrunner: BNP Paribas, Commerzbank


In some circles the idea of an Iranian Eurobond, which had been rumoured for some time, had been a dinner party joke. But the success of the Islamic Republic of Iran's debut Eurobond is undisputable.

The e500 million deal, for which BNP Paribas and Commerzbank were joint bookrunners, was struck at the top of the indicated range and was followed a few days later by a e125 million tap issue. The five-year issue, which offered an 8.75% annual coupon, was priced at a launch spread of 425 basis points over mid-euro swaps, equivalent to 449bp over Bunds. The deal, done in the name of the Iranian central bank, Bank Markazi Iran, is the first international debt issue to come out of Iran since the 1978-79 revolution.

Although ultimately successful, the deal suffered an early setback when Moody's withdrew its rating. Moody's had assigned the Iranian sovereign a B2 foreign currency rating in 1999 and had announced that its rating was under review for a possible upgrade in November 2001.

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