Brazil sets spread for 2037 bonds at Treasuries plus 205 bps in exchange offer

By Reshmi Basu

New York, Aug. 2 - The Federative Republic of Brazil said it would issue up to an additional $1.5 billion in 7 1/8% bonds due 2037 at a spread of 205 basis points over Treasuries as part of its proposal to buy back existing bonds with maturities ranging from 2020 to 2030.

The exchange started last Thursday and will end at 3 p.m. ET on Wednesday. The results will be announced on Thursday.

Settlement is scheduled for Aug. 16.

Last week, Brazil's treasury said it would buy back global bonds due in 2020, 2024, 2027 and 2030 worth $8 billion in exchange for the 2037 bonds via a reverse modified Dutch auction.

Holders can exchange the following bonds for the new 7 1/8% global bonds due 2037:

• 12¾% dollar-denominated global bonds due 2020;

• 8 7/8% dollar-denominated global bonds due 2024;

• 8 7/8% dollar-denominated global bonds due 2024, series B;

• 10 1/8% dollar-denominated unsecured global bonds due 2027; and

• 12¼% dollar-denominated global bonds due 2030.

Holders will receive $1,000 principal amount of the 2037 global bonds for each $1,000 principal amount of the existing bonds.

In addition, for each series of old bonds exchanged, holders will receive cash equal to the difference between the exchange price of that series and the reoffer price of the 2037 global bonds.

Holders can submit competitive offers with a spread in basis points that they will accept as a clearing spread differential or non-competitive offers, without a spread.

The clearing spread differential will be added to the reoffer spread for the 2037 bonds and used to calculate the reoffer price.

Brazil will also pay accrued and unpaid interest up to but excluding the settlement date minus the accrued and unpaid interest on the 2037 bond.

A reverse modified Dutch auction will be used to set the clearing spread differential for each series of existing bonds. That spread will be used to set the exchange price.

Citigroup (800 558-3745 or call collect 212 723-6108) and Deutsche Bank (866 627-0391 or call collect 212 250-2955) are the deal managers for the transaction.

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