Panama outlines bond plans
Finance Minister Dulcidio De La Guardia tells LatinFinance that Panama will raise $1.25bn in the cross-border market
Panama aims to raise $1.25bn in the cross-border
bond market this year and is also in talks for a hybrid
transaction to finance the construction of the fourth bridge
over the Panama Canal, the country’s finance
minister told LatinFinance.
The Central American sovereign issuer has
approximately $2.7bn in funding needs for 2017, including $800m
to refinance maturing debt, Dulcidio De La Guardia said at the
IDB-IIC Annual Meeting in Asuncion, Paraguay. Panama also plans
to print $700m in the local capital markets, he said.
Some Central American countries took advantage of
market conditions in Q1 to kick off their fundraising plans for
2017, but Panama was absent from the cross-border market. With
plenty of cash on hand, the country preferred to focus on
consolidating its cash balances into a single treasury account,
rather than raise more debt, De La Guardia said.
"We have high balances that we are slowly bringing
into a single treasury account," he said. "It does not make
sense to get more debt and pay interest when you have cash in
But with $800m in debt maturing this year, Panama
will work on lowering its cost of funding, De La Guardia said.
"We do not want the average maturity of Panamanian debt to be
less than 10 years," he said. "We want to make sure that every
year the average [cost of debt] Panama pays is less than
Other sources said Panama could raise at least
$1bn in the cross-border market as long as market conditions
permit. The investment grade rated sovereign raised $1bn from
the sale of 12-year
3.875% cross-border bonds in March last year with Credit
Suisse and Morgan Stanley leading the transaction.
Panama’s dollar economy presents
little need for the country to explore bond issues in different
currencies, but De La Guardia said Panama has debt in Japanese
yen, including a ¥281bn ($2.53bn) loan from the Japan
International Cooperation Agency (JICA) to finance Line 3 of
the Panama City metro.
"We have to make up our mind whether we want to
hedge [the JICA loan]," De La Guardia said. "We prefer dollars
but we have looked from time to time at other currencies."
Panama has several infrastructure projects in need
of funding, and De La Guardia said most of them will be
financed with multilateral loans. Last month, for example,
Latin American development bank CAF approved
$245m in loans for education and water investments in the
The fourth bridge over the Panama Canal will be an
"off balance sheet transaction" with a combination of mini-perm
loans and a bond issue. De La Guardia said Panama has hired a
bank to coordinate the financing but he did not say which
"We want to make sure that all projects initiated
in the previous administration are finished under the Varela
administration," he said. "We do not want to give the next
administration the same issues we faced when we took
De La Guardia said that when President Juan Carlos
Varela took office in 2014, several infrastructure projects
came with disputed contracts or with no budget attached. He
said the Varela administration wants to complete the pipeline
before 2019. "We want to be responsible in terms of what we
pass to the next administration," De La Guardia said.
The government outlined plans in November to invest up to
$10bn in public works projects, including two subway lines
and the fourth canal bridge.