The issue is the second this year as well as since the 1979 Islamic Revolution. The country launched its first bonds in July against perceived uncertainty surrounding the issue only to prove skeptics wrong with an oversubscribed investor demand.

The Persian daily Iran quoted Nourbakhsh as saying that the issue will be made in two tiers to procure foreign investment in energy projects.

The first bond was offered for 500 million euros, in addition to 126 million euros later on the back of a successful launching via lead managers BNP Paribas and Germany's Commerzbank.

It also came shortly after Moody's Investor Service withdrew Iran's debt rating, under apparent pressure from the US government which has been implementing a unilateral sanctions against the Islamic Republic.

The bond issue is part of Iran's efforts to reduce cost of borrowings which have mostly been in buy-back schemes so far, in which the foreign entity recoups its spending as well as cost of equipment and the technology offered once output comes on stream.

The daily Iran quoted Nourbakhsh as saying the credits will go to the implementation of several development projects in the industry, energy, higher education sectors as well as equipping the country's airports, for which the government needs two billion dollars in foreign finance.

Nourbakhsh said that they had decided first to procure the credit from advance oil sales, but they changed their mind and opted for bond issuance, given its lower cost as well as Iran's successful experience during the first bond issue.

However, there remains the question of interest rates for the bonds. Iran offered a 8.75 percent interest for five years in its first issue. This is far above for the benchmark euro swaps, which hover around four percent.

... Payvand News - 8/31/02 ... --