WASHINGTON, Oct 8 (IFR) - Panama plans to tap the foreign
bond markets during the first semester of next year to cover a
portion of its funding needs in 2017, the country's finance
minister told IFR on Saturday.
The Central American country will raise the US$2.6bn it
needs through international and local debt markets as well as
with multilaterals, said Dulcidio de la Guardia, Panama's
Economy and Finance Minister.
Conditions remain benign for emerging market sovereigns amid
an ongoing bid for the asset class, and de la Guardia sees this
continuing into 2017, even following a widely expected December
rate hike in the US.
"It will continue to be a favorable market," he said. "We
don't see any major issues in raising funds for next year."
The sovereign, which is rated Baa2/BBB/BBB, will likely
stick to the medium or the long end of the curve, in line with
its strategy of issuing paper of 10 years or more in the
international markets and tapping the local market for
"Our policy is to have an average maturity of 10 years to
reduce refinancing risks," said de la Guardia, noting the
country's curve has flattened of late.
Panama's 3.875% 2028s have recently been trading at a yield
of 3%, well below their 3.979% pricing level in March. Its 6.7%
2036s are quoted at around 3.9-3.8%, according to Thomson
A plan to consolidate balances across thousands of
government accounts at the Treasury level has also allowed the
government to more easily access its cash, reducing the amount
of bonds it needs to issue each year.
"Because of that we are going to avoid issuing this year
US$400m to US$500m," said de la Guardia. "The objective is to
avoid issuing the same amount next year."
A liability management transaction may also be on the cards,
ahead of the country's next big international bond maturity - a
US$1bn bond that comes due in 2020.
"When the time is right we will do a liability management
(operation) for that maturity," he said.
A couple of Panamanian infrastructure projects could also
tap the international capital markets next year for funding,
including a US$1.2bn bridge over the Panama Canal.
The government will provide some equity while the rest of
the funding will come through debt.
Banks are already poring over requests for proposals which
are due back the first week of November and a mandate is
expected by year's end, said de la Guardia.
A syndicated loan is the most likely option given
bondholders' dislike for taking on construction risks but a
take-out in the capital markets could come later.
The IFC, the World Bank's private sector arm, is also
working on the funding for an up to US$700m electric
transmission project, he said.
(Reporting by Paul Kilby; Editing by Davide Scigliuzzo)