Panama seeks to reduce the risk of refinancing with the repurchase of debt

The Republic of Panama is offering to repurchase US$837 million of bonds due 2024 in a bid to increase the duration of its international debt as volatility in financial markets increases.

The Central American nation is offering to buy its 4% bonds at a spread of 26 basis points over the US Treasury due on October 31, 2024, according to a statement on Monday.

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At current prices, that equates to a return of about 4.76% or 98.6 cents on the dollar.

The shares were trading at about 97.7 cents on the dollar at Friday’s settlement, according to Bloomberg offer prices.

Panama announces the repurchase offer after having raised US$1.5 billion of 12-year debt at a yield of 6.528%, according to data from Bloomberg.

Although the new debt is more expensive than the notes it seeks to withdraw, Panama is reducing its refinancing risk, which investors value in periods of increasing volatility in financial markets.

The borrowing costs of Latin American borrowers in dollars skyrocketed compared to the levels seen at the beginning of the year.

The return of the Bloomberg Emerging Markets LatAm Statistics Index was 8.51% as of Friday, compared to 5.25% on December 31. Bank of America Corp and HSBC Holdings Plc, which handled the Nov 14 bond sale, are also organizing the takeover bid.

Offer expires November 29 at 7:30 a.m. in New York and the offer price will be set based on the benchmark US Treasury yield on November 29 at 10 a.m., according to the statement.

With information from Bloomberg Línea