Panama to Sell First Samurai Bond, Vallarino Says

(businessweek.com) (Adds that sale is first Samurai offering in first paragraph; yield comparisons in third and sixth.)

Sept. 23 (Bloomberg) -- Panama plans its first yen- denominated bond sale with an offer to raise at least $500 million on Japanese markets early next year, Finance Minister Alberto Vallarino said.

“Our government wants to diversify its funding options and raise the profile of Panama amongst Japanese and Asian investors,” he said in an interview today at the office of Panama’s mission for the United Nations in New York.

The Central American country will be able to lower its borrowing costs by selling debt in Japan rather than in the U.S., he said. The yield on Panama’s 5.2 percent dollar bonds due in 2020 tumbled 112 basis points, or 1.12 percentage point, this year to 3.97 percent, according to data compiled by Bloomberg.

European banks from Barclays Plc to BNP Paribas SA are selling a record amount of yen bonds in Japan, spurring the Samurai market to its busiest quarter in two years as investor demand for yield overrides concern about the lenders’ sovereign debt exposure. Panama will follow Mexico, which plans to sell about 150 billion yen ($1.8 billion) of bonds backed by the Japan Bank for International Cooperation in October, according to Octavio Lara, deputy general director of debt issuance at Mexico’s Ministry of Finance.

Vallarino said that the yen-denominated bonds will have a lower rate than Panama’s dollar bonds even after including currency swap costs.

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Moody’s Investors Service raised Panama’s credit rating to Baa3, the lowest investment grade, in June, matching moves from Fitch Ratings in March and Standard & Poor’s in May. The nation’s dollar bonds yield an average 183 basis points over U.S. Treasuries, compared with 212 for Brazil, whose debt carries the same credit ratings.

Barclays, BNP Paribas and three other European commercial lenders raised 499.7 billion yen in Japan since July 1 through the end of last week, the most ever in a quarter, according to data compiled by Bloomberg. Their bonds make up 58 percent of the total 869 billion yen of Samurai sales in the period, the most since borrowers sold 1.165 trillion yen of the securities in the three months to June 30, 2008, the data show.

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Original Source: businessweek.com
Date Retrieved: September 24, 2010