Venezuela sets 520 bps spread for new global bonds, exchange

New York, Sept. 27 - The Bolivarian Republic of Venezuela announced the new issue spread for its planned offering of global bonds and the minimum clearing spread in its exchange for existing Brady Bonds will be 520 basis points in both cases.

The exchange expires at 4 p.m. ET on Sept. 28. Results will be announced at 10 a.m. ET on Sept. 29.

Venezuela announced on Sept. 22 that it is offering a maximum $1.5 billion of 10-year global bonds in exchange for select Brady bonds and for cash.

Some issues of Brady bonds maturing in 2007 and 2008 can be exchanged in a modified Dutch auction for new dollar-denominated global bonds due Oct. 8, 2014. The new bonds will be non-callable.

The eligible Brady bonds are denominated in dollars, sterling, Swiss francs and Deutsche marks.

The dollar-denominated bonds include the front-loaded interest reduction bonds (Flirb) due 2007 series A and B, the debt conversion bonds (DCB) due 2007 series DL and the debt conversion bonds due 2008 series IL.

The Deutsche mark-denominated bonds include the Flirbs due 2007 and the DCBs due 2007.

The sterling-denominated bonds include the Flirbs due 2007 and the DCBs due 2007.

The Swiss franc-denominated tranche is the Flirbs due 2007.

Under the exchange, Brady bond holders will submit a spread over Treasuries at which they will accept the new global bonds.

Venezuela will select a clearing spread for the Flirbs as a group and a spread for the DCBs as a group - now announced as 520 basis points.

Brady bond holders will receive a principal amount of global bonds equal to the principal amount of the old bonds multiplied by the exchange ratio. The exchange ratio will be the applicable scaling factor for each issue times $1,000 times the currency exchange rate divided by the applicable global bond exchange price for the Flirbs or DCBs.

They will also receive accrued interest up to but excluding the settlement date in cash and cash for rounded amounts. The Sept. 30 coupon on the Flirbs will be paid to holders and the scaling factor reflects the Sept. 30 principal payments on the Flirbs.

The scaling factors are:

* 0.23810 for the dollar-denominated Flirbs due 2007, series A and B, sterling Flirbs due 2007 and Swiss franc Flirbs due 2007;

* 0.33333 for the dollar-denominated DCBs due 2007 series DL and the sterling DCBs;

* 0.39130 for the dollar-denominated DCBs due 2007 series IL;

* 1.00000 for the Deutsche mark Flirbs and DCBs.

Venezuela reserves the right to reject tenders, to pro rate particular issues of Brady bonds and to issue no new bonds for cash.

The new global bonds will be priced at a spread over the 4¼% U.S. Treasury bond due Aug. 15, 2014. The spread was announced as 520 basis points.

No more than $1.5 billion of new global bonds will be issued in total under the transaction.

"The global bond offering is part of a broader program of the Republic to manage its external liabilities," the country said in its prospectus for the offer.

"In addition, the issuance of the global bonds is intended to provide a liquid, sovereign risk benchmark for the Republic."

Proceeds from the cash offering are expected to be used for general purposes, including the refinancing of the country's domestic and external indebtedness.

The offer will close at 4 p.m. ET on Sept. 28, with the results of the exchange and sale announced on Sept. 29.

The settlement date is expected to be Oct. 8.

Barclays Capital Inc. (866 307-8991 or collect 212 412-4072) and Merrill Lynch & Co. (888 654-8637 or collect 212 449-4914) are dealer managers of the sale. The information agent is Georgeson Shareholder Communications, Inc. (212 440-9800).

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