Panama Fund Botches Bond Attempt

Panama has pulled a sale of up to $759.7m in existing global bonds held in a development fund, reversing course due to low bids. The government-backed Fondo Fiduciario para el Desarrollo announced Thursday morning it would sell 3 series of sovereign bonds through an auction, before cancelling the transaction in the early afternoon, according to investors. “This is likely to introduce a supply-risk premium on Panama’s curve,” Boris Segura, economist at RBS, tells LatinFinance, even though it didn’t go through with the sale. He adds that the low bids received were a reflection of the unusual nature of the transaction, as the fund had never sold the government debt it holds in such a large amount. The late December timing did not help. Segura estimates the fund – created in the 1990s with proceeds from various privatizations – has about $1.25bn, some 90% of which is sovereign debt. The fund was set to offer up to $345.9m in 6.7% of 2036 bonds, up to $62.2m in 8.125% of 2034s and up to $351.7m in 8.875% of 2027s. The bonds dropped in price on announcement of the deal, according to a trader, with the 2036 losing as much as 5 points, and finishing around 104.5. Bids for the 2036s were heard coming in at 103-104. Citi was managing the sale, and declines to comment. Panama claims to have seen almost $600m in demand for the deal. “The seller thanks the investment community for its interest and participation in the auction process,” it adds. Panama was widely lambasted for a poorly timed March reopening, which according to bankers, left money on the table.