Wall St Snaps Up Record $3bn Brazilian Debt Issue

A record $3 billion Brazilian bond offering has Wall Street agog. Brazil is still limping towards economic health, but investors were swarming to buy the countrys 30-year dollar-denominated bond issue, which closed here Wednesday. The issue set a record as the largest unsecured offering from a a developing country.

The bonds were snapped up quickly, at a yield of 10.896 per cent or 3.95 percentage points over the US Treasury bond. As investor interest picked up, the spread narrowed to 3.71 per cent over the Treasury rate.

Issue underwriters J P Morgan and Goldman, Sachs were delighted with the response. The offering was structured to help Brazil replace its Brady bonds, financial instruments which were created in 1889 under the US treasury secretary Nicholas Brady to help debt-ridden Latin American nations. As much as $2.25 billion of the new offering went to buy back $2.7 Brady bond debt.

 

Only $750 million, a quarter of the new issue, was set aside for new investors.

The response was overwhelming; the underwriters reportedly received offers worth a staggering $16 billion for that portion of the issue.

The successful placement of the offering leaves Brazil with a key benchmark for issues in the international capital markets. To put that in perspective: Mexico, which sold bonds worth $1.75 billion last year, had to settle for a margin of more than 5.5 percentage points over the 30-year Treasury Bond.