Panama to hold one-day exchange offer for 9 5/8%, 9 3/8% bonds Tuesday

By Angela McDaniels

Tacoma ,Wash., June 2 - The Republic of Panama will hold an exchange offer for its 9 5/8% global bonds due 2011 and 9 3/8% global bonds due 2012 on Tuesday, according to a news release.

Holders who exchange will receive newly issued 9 3/8% dollar-denominated global bonds due 2029, which were first issued in 2006.

There are currently $500 million of the 9 3/8% bonds due 2029 outstanding, and Panama said it will issue a maximum of $500 million of these bonds under the exchange offer.

In addition to the new 9 3/8% bonds, holders will receive a net cash payment equal to the accrued interest on the old bonds less accrued interest on the new 9 3/8% bonds since their last interest payment date on April 1 plus cash in lieu of rounding down because the new 9 3/8% bonds can only be delivered in multiples of $1,000.

The offer is set to begin at 3 a.m. ET on Tuesday and will expire at 5 p.m. ET that day.

Panama said the amount of new 9 3/8% bonds delivered will equal the accepted amounts of old bonds multiplied by the repurchase price divided by the reopening price.

The repurchase prices and the reopening price will be based on the sum of the yields of reference U.S. Treasury notes and spreads as shown below:

• The 2 5/8% U.S Treasury notes due May 31, 2010 and 107 basis points for the 9 5/8% bonds;

• The 3½% U.S. Treasury notes due May 31, 2013 and 94 bps for the 9 3/8% bonds; and

• The 4 3/8% U.S. Treasury notes due Feb. 15, 2038 and 168 bps for the new 9 3/8% bonds.

The U.S. Treasury note yields will be calculated based on the bid-side prices at 11 a.m. ET on Wednesday.

It is anticipated that exchanging holders will receive less principal amount of new 9 3/8% bonds than old bonds tendered, according to the release.

The new 9 3/8% bonds will be delivered on or about June 11, and Panama said it applied to list the newly issued bonds on the Luxembourg Stock Exchange and to have them trade on the Euro MTF Market.

Concurrently with the exchange offer, Panama is offering up to $235 million of its 7¼% dollar-denominated global bonds due 2015.

Global Bondholder Services Corp. (212 430-3774 for banks and brokers or 866 873-5600) is the information agent. Citibank, NA (44 20 7508 3866 or exchange.gats@citigroup.com) is the exchange agent, and Deutsche Bank Luxembourg, SA (352 42122 243) is the Luxembourg exchange agent.

Citigroup Global Markets Inc. (800 558-3745 or 212 723-6108) and Deutsche Bank Securities Inc. (866 627-0391 or 212 250-2955) are the joint dealer managers.

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