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Brazil Teases Out Bradys

Sep 11, 2003

A $1.33 billion debt exchange retired Brazil's expensive Brady bonds. But the deal miffed some investors who thought they would be able to cash in their benchmark C-bonds.

Brazil executed a $1.33 billion debt exchange in July, its first in two years, achieving some of its highest-ever participation rates from holders of its Brady bonds and releasing $650 million in collateral. While the Brazilians hailed the deal as a success, some investors were unhappy with the way it was structured, and complained they had been led to expect a more ambitious transaction, perhaps involving the withdrawal of a big chunk of Brazil's benchmark C-bond. But the Brazilians refused to pay the premiums bondholders were expecting. Beny Parnes, the central bank's international director, says bluntly, "We represent the interests of the Republic and we will not forget that. We are responsible for the liability management of the Republic and we care about diminishing costs for the Republic."

Bankers focused on the deal's positive aspects. Cheikh Kane, a vice...

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