Panama to buy back or exchange $508.61 million 7¼% bonds due 2015

By Angela McDaniels

Tacoma, Wash., Jan. 30 - The Republic of Panama will purchase $250,127,000 principal amount of its $1,471,000,000 of 7¼% global bonds due 2015 for cash and issue $248,596,000 principal amount of new bonds in exchange for $258,478,000 principal amount of 7¼% bonds.

An exchange offer and a tender offer for the bonds began on Jan. 17 and ended at 5 p.m. ET on Jan. 24. Panama announced the preliminary results on Jan. 25 and the final results on Jan. 30. The settlement date is expected to be Feb. 1.

The offers were conditioned on the settlement of an issue of local Panamanian bonds or other financing. This condition has been satisfied.

Exchange offer

The republic offered reopened 6.7% dollar-denominated amortizing global bonds due 2036 in exchange for the 7¼% bonds. The reopened bonds will form a single series with the $1,785,279,000 of 6.7% bonds already outstanding.

Panama was also potentially offering cash, the amount of which would have been determined via a modified Dutch auction. Panama decided the clearing cash premium will be zero, meaning holders will receive bonds only in the exchange offer.

Holders submitted $258,478,000 of bonds in noncompetitive offers, all of which were accepted. No competitive offers were accepted. Accordingly, none of the bonds submitted with an offer premium above zero were accepted.

In exchange for each $1,000 principal amount of bonds exchanged, holders will receive $962.01 principal amount of reopened bonds. This is equal to $1,000 multiplied by the quotient of the old bond exchange value divided by the reopened bond exchange value.

The old bond exchange value is $1,194.37. This is (a) a price intended to result in a yield to maturity on the settlement date calculated using the 0.25% Treasury due Jan. 15, 2015 plus 135.2 basis points plus (b) the amount of interest accrued on the old bonds from the most recent interest payment date.

The old bond Treasury benchmark rate is 0.38%, and the yield used to determine the old bond exchange value is 1.732%.

The reopened bond exchange value is $1,241.53. This is (a) a price intended to result in a yield to maturity on the settlement date calculated using the 3.125% U.S. Treasury due Nov. 15, 2041 plus 181.3 bps plus (b) the amount of interest accrued on the reopened bonds since the most recent interest payment date.

The reopened bond Treasury benchmark rate is 3.124%, and the yield used to determine the reopened bond exchange value is 4.937%.

Holders will not receive a payment for accrued interest on their 7¼% bonds. They will not be required to pay an amount equal to the interest accrued on the reopened bonds.

Cash invitation

The republic also conducted a concurrent cash invitation for holders to submit offers to sell their 7¼% bonds back to Panama for cash.

Panama decided that the clearing cash premium will be zero. As a result, holders will receive the base purchase price, $1,166.98, for each $1,000 principal amount of bonds.

Holders will also receive accrued interest.

Holders submitted $500,302,000 of bonds in noncompetitive offers. The proration factor for these bonds is 50%. No competitive offers were accepted. Accordingly, none of the bonds submitted with an offer premium above zero were accepted.

The base purchase price is based on the yield of the 0.25% Treasury due Jan. 15, 2015 plus a spread of 135.2 bps. The Treasury rate is 0.38%, and the yield used to determine the base purchase price is 1.732%.

Any bond could be tendered in the exchange offer or concurrent cash invitation but not both.

Notes exchanged or purchased through the offers will be canceled.

Bondholders located outside the United States could not participate in the exchange invitation before confirming their status as qualified investors or that they met other eligibility standards.

The dealer managers are Goldman Sachs & Co. (800 828-3181 or 212 902-5183) and Citigroup Global Markets Inc. (800 558-3745 or 212 723-6108). The information and exchange agent is Bondholder Communications Group, LLC (888 385-2663, 212 809-2663 or 44 20 7382 4580).

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