Peru to accept $1.8 billion of notes in tender offer, exchange offer

By Angela McDaniels

Tacoma, Wash., April 15 - The Republic of Peru will accept $1,799,851,968 principal amount of bonds in the tender offer and exchange offer that ended at 5 p.m. ET on April 14, according to preliminary results included in an FWP filing with the Securities and Exchange Commission.

The bonds eligible for the offers were the republic's $401,612,000 of 9 1/8% global bonds due 2012, €650 million of 7½% global bonds due 2014, $750 million of 9 7/8% global bonds due 2015 and $1,332,895,000 of 8 3/8% global bonds due 2016.

Peru will accept:

• $77,552,000 of the 9 1/8% bonds in the tender offer and $11,838,000 in the exchange offer, leaving $312,222,0000 outstanding;

• €104.48 million of the 7½% bonds in the tender offer and €254,798,000 in the exchange offer, leaving €290,722,000 outstanding;

• $63,676,000 of the 9 7/8% bonds in the tender offer and $407,814,000 in the exchange offer, leaving $278.51 million outstanding; and

• $131.67 million of the 8 3/8% bonds in the tender offer and $620,121,000 in the exchange offer, leaving $581,104,000 outstanding.

The republic offered to spend up to $500 million in the tender offer. Because the offer was oversubscribed, Peru will accept all but the 9 1/8% bonds on a pro rata basis. The proration factor is 25% for the 7½% bonds and 9 7/8% bonds and 30% for the 8 3/8% bonds.

Holders were given the option to have any amount of their bonds not accepted for purchase automatically retendered into the exchange offer, as long as the amount to be exchanged meets the minimum threshold condition.

For each $1,000 or €1,000 principal amount, the purchase price in the tender offer is $1,143.01 for the 9 1/8% bonds, €1,172.17 for the 7½% bonds, $1,286.64 for the 9 7/8% bonds and $1,240.70 for the 8 3/8% bonds.

The payouts were determined using the 1% Treasury note due March 2012 and a spread of 10 basis points for the 9 1/8% bonds, the euro swap rate and a spread of 102 bps for the 7½% bonds, the 2½% Treasury note due March 2015 and a spread of 77 bps for the 9 7/8% bonds and the 2 5/8% Treasury note due April 2016 and a spread of 85 bps for the 8 3/8% bonds.

In the exchange offer, the exchange ratio is 0.8416 for the 9 1/8% bonds, 1.1703 for the 7½% bonds, 0.9474 for the 9 7/8% bonds and 0.9135 for the 8 3/8% bonds.

The republic expects to issue a total of $1,260,832,000 principal amount of 8¾% dollar-denominated global bonds due 2033 in the exchange offer.

The 8¾% exchange bonds have a current outstanding amount of $984,636,000, and the to-be-exchanged bonds will form a single series with the existing securities. There was no cap on the amount of new 8¾% bonds that could be issued.

The 8¾% bond issue price is $1,319.71, the bond benchmark rate is 4.72%, and the reopen spread is 144 bps.

The offers began on April 9.

The dealer managers are Barclays Capital Inc. (800 438-3242 or call collect 212 528-7581) and HSBC Securities (USA) Inc. (888 HSBC-4LM or 212 525-5552). The information agent is Bondholder Communications Group (212 809-2663 or 44 20 7382-4580).

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