Rafidain Bank to pay foreign creditors

04 April 2008
The UK High Court has approved a scheme of arrangement that allows foreign creditors to reclaim $300m in unpaid debts from Iraq’s Rafidain Bank.

At a hearing on 3 April, the court sanctioned the scheme, which was approved at a meeting of creditors in London on 20 March. Following the court’s decision, creditors will have six months to submit claims, under the UK Companies Act.

The state-owned bank was placed in provisional liquidation in 1991 with accounting firm PricewaterhouseCoopers (PwC) appointed as provisional liquidator. It is only since the removal of Saddam Hussein and the lifting of sanctions in 2003 that the case has made progress.

“These companies held letters of credit with the bank, having supplied goods to Iraqi businesses, and have never been repaid,” says Michael Gercke, joint provisional liquidator and a partner at PwC.

“It became clear that collecting these claims was nigh-on impossible, but since 2003 we have moved forward.”

PwC says the majority of the creditors are UK businesses, but it expects claims from 40 different jurisdictions.

The level of compensation likely to be claimed is not certain, but Gercke anticipates a figure close to $300m.

“We are holding $290m in assets so we are looking broadly at those sorts of numbers,” he says.

The scheme forms part of a wider effort in Baghdad to recapitalise the Iraqi banking system.

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