Brazil Sets Minimum Yield, Prices for New 40-Year Global Bond

Brazil

Posted by manya (Wednesday, August 09, 2000)
Brazil Sets Minimum Yield, Prices for New 40-Year Global Bond

Brazil's new 40-year Global bond will yield a minimum 12.932 percent, or 708 basis points over a benchmark U.S. treasury bond, when sold tomorrow for cash and old debt.

Brazil is selling a $1 billion or more of new dollar bonds in exchange for up to $500 million of cash and outstanding Brady bonds, a class of debt that was created to restructure defaulted obligations of Brazil and other emerging market countries.

The minimum prices and spreads were released this morning by Brazil and the banks managing the sale, Goldman, Sachs & Co., Chase Manhattan Corp. and Morgan Stanley & Co.

Investors will bid for their bonds today and the sale will be completed tomorrow. The sale will be settled on Aug. 17, 2000. Brazil and its bankers also set the following minimum spreads and offer prices at which it will accept old Brazilian Brady bonds for new Brazilian global bonds.

The spread represents basis points over Brazil's 30-year bond maturing in 2027 and the tender price represents the a percentage of the old bonds' face value.

Eligible Brady Bond Spread vs. '27 Tender Price

C-Bond +26 bps 74.627

DCB +58 bps 74.571

Discount -267 bps 78.947

EI -189 bps 92.219

Exits +37 bps 72.029

Flirbs +13 bps 80.037

NMBs -64 bps 85.608

Pars -333 bps 66.550

Newest messages appear on top.

08-10-00 manya: Brazilian debt prices shot higher on Thursday, propelled by a record emerging market bond swap that reduces the borrowing requirements of the nation with Latin America's biggest economy.
In the eagerly awaited deal, Brazil issued $5.16 billion in new 40-year global bonds in exchange for $5.22 billion in old Brady bonds. "Investors were just shocked about the size," an emerging market trader said. "It was a monster." The transaction gives net present value savings of $144 million to Brazil, officials said at a news conference in New York. And Brazil's central bank said the swap cuts debt servicing costs by $1 billion over 10 years.
"This deal means people are increasingly willing to buy the story that Brazil is a good long-term bet," said Jim Barrineau, a vice president in emerging markets research at Alliance Capital Management Emerging market bond spreads widened by nine basis points to 670 bps over U.S. Treasuries, according to J.P. Morgan's Emerging Markets Bond Index Plus. Brazil's portion of the index widened five basis points to 697 even though prices moved higher. "The U.S. bond market has traded higher, that's why spreads have widened in emerging markets, not that prices have traded down," Jaime Valdivia, Latin American debt strategist at Morgan Stanley Dean Witter said.
The new issue was trading nearly a full point higher late Thursday at 81.10 after it was offered at 80.2. "You'll see a little bit of profit taking (on the Brazilian debt)," the trader said. "There's a tendency to lighten up on the long end and maybe delve into the middle part of the curve. People are going to want to get their portfolio back to similar durations they had before the swap."

08-10-00 lol: The exhange rate for the new Global bond. Par 66.55 Discount 78.947
C-bond 74.627
DCB 74.571
FLIRB 80.037
NMB 85.608
EI 92.219
EXIT 72.029

08-10-00 Dieter: Details of Brazil's 40 year bond sale:

Brazil issued $5.16 billion in new 40-year global bonds on Thursday in exchange for $5.22 billion in old Brady bonds. The new bonds carry a coupon of 11.0 percent and were issued at a price of 80.203 to yield 13.732 percent, or 788 basis points over U.S. Treasuries due in August of 2029.The transaction achieved net present value savings to Brazil of $144 million. Brazil expects to collect $312 million of collateral from the Brady bonds retired. The bonds are callable in whole or in part at par beginning August 2015. Co-lead managers of the deal are Chase Securities Inc., Goldman, Sachs & Co. and Morgan Stanley & Co.

Click here to post a reply.

Please read our disclaimer.

General Correspondence: bradynet@bradynet.com Questions/Problems? support@bradynet.com