Wednesday, March 25, 2009

Peru plans to take advantage of Market Rally with sale of 10-year Dollar Bonds

Peru is planning on raising some money through the sale of 10-year US Dollar denominated bonds—the first offering of new dollar-denominated bonds for Peru in over two years.

Record setting commodity revenues from the past couple years helped Peru avoid having to raise money in the past, but as the global economy takes a turn for the worse and as commodity prices remain low Peru is now looking to take advantage of the recent market rally.

Furthermore, back in July of 2008 Peru’s foreign currency debt rating was raised to investment grade by Standard and Poor’s. Considering economists probably decided the upgrade up in North America where they have little concept of the true situation on the ground in Peru, it is smart for Peru to try and raise more money while they can hold onto the good investment grade.

Bloomberg reported in this article, Peru may sell the bonds to yield 4.50 percentage points above U.S. Treasuries. This information comes from a person familiar with the offering who declined to be identified because terms aren’t set. Peru hired Goldman Sachs Group Inc. and JPMorgan Chase & Co. to manage the sale, according to a filing today with the U.S. Securities and Exchange Commission, which didn’t specify the timing of the transaction.

“The rally in risky assets in the past couple of weeks opens a window of opportunity for countries with strong fundamentals such as Peru,” Boris Segura, an economist at Morgan Stanley in New York, said in a telephone interview.