Nicola Clark IHT Tuesday, June 11, 2002 The international capital markets are getting ready for something that has not happened since The Knack topped the American pop music charts with "My Sharona" and the Pittsburgh Pirates last won the World Series. . Iran has hired Commerzbank AG of Germany and BNP Paribas SA of France to help it sell up to E500 million ($472 million) worth of bonds to international investors - the country's first such transaction since the 1979 Islamic revolution. . Given the recent chilling of political relations between Washington and Tehran, one might be tempted to wonder if conditions for a transaction of this size still are not quite right. After all, Iran tops the latest State Department list of states that sponsor terrorism and President George W. Bush has branded it as a member of the "axis of evil." . Seeking to ensure that Iran remains an international pariah, Washington last week managed to bully Moody's Investors Service Inc., the U.S.-based credit-rating agency, into withdrawing its B2 rating on the Islamic republic. In a sharply worded letter, the Treasury Department warned Moody's that its rating, assigned in 1999, violated a 1995 U.S. ban on trade and investment with Iran. . But Iran and its bankers are uncowed. While the lack of a Moody's rating may prevent certain fund managers from buying the bonds, analysts say their numbers are too small to endanger the issue. After all, they note, Iran does have a B-plus rating from London-based Fitch Ratings. . As the world's fifth-largest oil producer, Iran has benefited handsomely from the recent recovery in prices for crude. Tehran has used its high oil revenues to reduce external debt to around 7 percent of gross domestic product from a peak of 23 percent in 1993. . "Investors will definitely be interested in Iran's bonds as an oil play," said James McCormack, a sovereign-debt analyst at Fitch. He predicts the bonds will appeal primarily to European and Middle Eastern banks as well as to emerging market funds seeking to diversify their holdings. . As part of a campaign to woo foreign investors, Tehran has just passed a series of new laws aimed at easing the flow of capital and goods into and out of the country. . While these measures will reassure some investors, Iran's economy still has some way to go before it becomes a true magnet for foreign investment. . "These reforms will definitely raise Iran's profile," McCormack said. "But the economy is still dominated by the state. Until that structure starts to change, there is unlikely to be much direct investment in Iran." . In the coming months, Iranian officials are expected to promote the bond to prospective investors in Europe, the Middle East and Asia. . The bonds will be strictly off limits to Americans, however. U.S. citizens found to be in violation of the trade and investment sanctions face up to 10 years in prison and a $250,000 fine. Corporations can be fined up to $500,000.- Nicola Clark (IHT) < < Back to Start of Article The international capital markets are getting ready for something that has not happened since The Knack topped the American pop music charts with "My Sharona" and the Pittsburgh Pirates last won the World Series. . Iran has hired Commerzbank AG of Germany and BNP Paribas SA of France to help it sell up to E500 million ($472 million) worth of bonds to international investors - the country's first such transaction since the 1979 Islamic revolution. . Given the recent chilling of political relations between Washington and Tehran, one might be tempted to wonder if conditions for a transaction of this size still are not quite right. After all, Iran tops the latest State Department list of states that sponsor terrorism and President George W. Bush has branded it as a member of the "axis of evil." . Seeking to ensure that Iran remains an international pariah, Washington last week managed to bully Moody's Investors Service Inc., the U.S.-based credit-rating agency, into withdrawing its B2 rating on the Islamic republic. In a sharply worded letter, the Treasury Department warned Moody's that its rating, assigned in 1999, violated a 1995 U.S. ban on trade and investment with Iran. . But Iran and its bankers are uncowed. While the lack of a Moody's rating may prevent certain fund managers from buying the bonds, analysts say their numbers are too small to endanger the issue. After all, they note, Iran does have a B-plus rating from London-based Fitch Ratings. . As the world's fifth-largest oil producer, Iran has benefited handsomely from the recent recovery in prices for crude. Tehran has used its high oil revenues to reduce external debt to around 7 percent of gross domestic product from a peak of 23 percent in 1993. . "Investors will definitely be interested in Iran's bonds as an oil play," said James McCormack, a sovereign-debt analyst at Fitch. He predicts the bonds will appeal primarily to European and Middle Eastern banks as well as to emerging market funds seeking to diversify their holdings. . As part of a campaign to woo foreign investors, Tehran has just passed a series of new laws aimed at easing the flow of capital and goods into and out of the country. . While these measures will reassure some investors, Iran's economy still has some way to go before it becomes a true magnet for foreign investment. . "These reforms will definitely raise Iran's profile," McCormack said. "But the economy is still dominated by the state. Until that structure starts to change, there is unlikely to be much direct investment in Iran." . In the coming months, Iranian officials are expected to promote the bond to prospective investors in Europe, the Middle East and Asia. . The bonds will be strictly off limits to Americans, however. U.S. citizens found to be in violation of the trade and investment sanctions face up to 10 years in prison and a $250,000 fine. Corporations can be fined up to $500,000.- Nicola Clark (IHT)