U.S. charges Israel 7% on loan guarantees

[bemildred]

The U.S. is charging Israel a fee of 7 percent on its bonds issued under
the loan guarantee program. The charges were discovered in a Bank of
Israel report on macroeconomic and political developments released
last week.

According to the report, 7 percent of the receipts from the Israeli
government's bond issues is to be transferred to U.S. treasury in order
to compensate it for the risk of the issue (known as scoring). This is
considered to be a relatively high rate for bond issues.

The value of the total bond issue is $3 billion or NIS 13.575 billion, which
brings the fees to some NIS 1 billion, representing an additional 0.3
percent in annual interest costs for Israel.

The treasury publicized the results of its bond issue in the middle of
September, and stated that it was pleased that the interest rate for the
30 year issue was 5.58 percent, only 38 basis points (0.38 percent)
over the interest on U.S. government bonds. The 20 year bonds, which
raised most of the funds - $1.15 billion out of a total of $1.6 billion raised
on the issue to date - were sold at an interest rate of 5.53 percent,
representing a premium of only 33 basis points over U.S. government
rates for similar notes. However, the effective interest rate premium for
the bonds including the fees paid to the U.S. treasury comes to 70 basis
points.

Haaretz