Venezuela exchanges $710 million global bonds due 2014 for Brady bonds

By Reshmi Basu

New York, Sept. 29 - The Bolivarian Republic of Venezuela said it issued $710 million 8½% global bonds due 2014 in an exchange for Brady bonds.

Venezuela sold the remaining $790 million to investors for cash (see separate story for details).

Select Brady bonds maturing in 2007 and 2008 were exchanged in a modified Dutch auction for new $1.5 billion global bonds due Oct. 8, 2014.

The eligible Brady bonds were 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 included the Flirbs due 2007 and the DCBs due 2007.

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

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

Bonds accepted in the exchange were:

* $531 million of dollar-denominated Flirbs due 2007, series A at an exchange ratio of 0.2505;

* $318 million of dollar-denominated Flirbs due 2007, series B at an exchange ratio of 0.2505;

* $1.15 billion of dollar-denominated DCBs due 2007 series DL at an exchange ratio of 0.3507;

* $206 million of dollar-denominated DCBs due 2007 series IL at an exchange ratio of 0.4117;

* DM0.9 million Deutsche Mark-denominated Flirbs due 2007 at a currency exchange rate of 0.6300 and an exchange ratio of 0.6628;

* DM3.36 million of Deutsche Mark-denominated DCBs due 2007 at a currency exchange rate of 0.6300 and an exchange ratio of 0.6628;

* £3.24 million of sterling-denominated Flirbs due 2007 at a currency exchange rate of 1.8013 and an exchange ratio of 0.4512;

* No sterling-denominated DCBs due 2007 were exchanged. The currency exchange rate was 1.8013 and the exchange ratio of 0.6317;

* CHF20 million Swiss franc-denominated Flirbs due 2007 at a currency exchange rate of 0.7945 and an exchange ratio of 0.1990;

The exchange was run as a dutch auction in which Brady bond holders submitted a spread over Treasuries at which they will accept the new global bonds.

Venezuela selected a clearing spread for the Flirbs as a group and a spread for the DCBs as a group - 520 basis points in each case.

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.

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.

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 closed at 4 p.m. ET on Sept. 28.

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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