Panama bond sales off to rocky start

This week Panama took advantage of some credit easing and offered bonds which according to those in the industry was good for investors, but not for Panama. Surprisingly, the original amount of the offering was to be $120 million but was expanded to over $320 million. This debt is to carry its budget for 2009. At the end of the story they say Panama was sounding out the industry on a new 10 year bond indicating they will need more.

From Latin Finance
Panama left a large pile of cash on the table during a Wednesday bond reopening that was crippled by a surprise move from the US Fed, say investors and bankers. Just how much the Central American issuer could have saved by waiting is unclear, but the market was generally scathing of the reopening of a 7.25% coupon 2015 issue for $323m. “They gave away a lot of money,” says a banker not on the transaction. “It was good for investors. The issuer could have captured additional value,” says another. Coasting on a recent EM rally, the sovereign went out at 101 area guidance. This equated to a reopening premium of 35bp-50bp, based on pre-announcement trading bid levels of 102.5-103.5, according to investors. However, stating a price – rather than a yield/spread as in Panama’s June’s tap of the same issue – caused problems when US Treasuries snapped tighter after the Fed’s surprise announcement of a plan to purchase $300bn in T-bills. A dedicated EM investor who participated estimates UST tightening added 40bp-50bp to the reopening premium. Bankers on the deal counter that EM assets widened Wednesday, reducing the effect of treasury compression. Nonetheless, the 5 and 10-year UST contracted 40bp-50bp on the day, while the Panama 2015 was last heard at 102. And with the FOMC meeting clearly telegraphed, the sovereign might have been better off waiting. By contrast, Israel was hoping to bring a 10-year bond this week, but opted to suspend pricing and resume today. The tap marks the BB+ issuer’s third reopening of the 2015 since launch in 2004, according to Dealogic, and the total size now stands at nearly $1.5bn. The offer was more than twice oversubscribed, according to bookrunners, including orders from 50 accounts, roughly 75% in the US and 25% in Europe. Proceeds are aimed at financing the budget and restructuring debt. Morgan Stanley and UBS were the leads. Panama was also heard sounding out investors for a new 10-year, says an investor. The issuer did not return calls.