UPDATE 2-Peru tests waters with jumbo LM trade

miércoles 28 de septiembre de 2016 16:24 GYT

(UPDATES throughout)

By Paul Kilby

NEW YORK, Sept 28 (IFR) - Peru announced a 12-year bond on Wednesday as part of an exchange and tender for US$13bn equivalent of securities, as it looks to reduce its dollar debt and please the rating agencies.

Books on the sol-denominated bond swelled to S10.8bn (US$3.2bn), allowing leads to ratchet in the yield to 6.375%, 25bp tighter than guidance of 6.625% area.

At that level, Peru was offering an approximately 3/8s concession to its local currency debt curve, where its 2026s and 2031s were respectively trading at around 5.87% and 6.19%, a banker told IFR.

The international bond - Peru's first since former banker Pedro Pablo Kuczynski assumed the presidency in July - continues the country's longstanding practice of favoring local currency plays over dollar deals.

"This is certainly the largest (liability management transaction) they have ever done," said Sean Newman, senior portfolio manager at Invesco.

"It will have a positive impact on their vulnerability to currency swings ... and if they get everyone involved it could have a transformative (impact) on ratings."

Rating agencies have long encouraged the country to de-dollarize its debt stock, and swaps such as these only support the country's case for an upgrade.   Continuación...