Nothing sums up the current bullish attitude to the bond markets more than the Republic of Panama's $500 million Euro-144A bond issue. Just a year ago its Brady interest reduction bonds (IRBs) were trading at 950 basis points (bp) over US treasuries and, when Moody's and Standard and Poor's assigned them a rating two months ago, it was at the sub-investment grade of Ba1/BB+. But after extensive marketing the new deal was a blow-out even after doubling in size.
BankBoston won the mandate because of its earlier association with Panama. Steven DeSalvo, managing director and co-head of emerging market debt syndication, says: "We've been marketing Panama for some time now. We acted as their adviser on their Brady bond restructuring, and were their ratings adviser. We saw a story in Panama that others didn't appreciate until we brought the deal."
It's not an issue which dealers or investors would have been happy with even 12 months ago, yet after an extensive roadshow in Korea, Europe and all across the US, it flew. Investors were so hungry for the paper that the government decided to double the issue from $250 million just a couple of days before the end of the roadshow: "And we still had more [investors] on our books even after the increase," says DeSalvo.