May 12, 2016 / 9:07 PM / in 2 years

UPDATE 1-Citigroup revives bond for Panama's Tocumen airport

(UPDATES throughout)

By Paul Kilby and John Balassi

NEW YORK, May 12 (IFR) - Citigroup revived a bond sale for Panama’s Tocumen Airport on Thursday after pulling the deal in the wake of money-laundering allegations against the owners of its largest duty-free shops.

In what has become a very complicated trade, the US bank has tweaked the bond’s structure and is now marketing a US$500m-plus 2036 offering at a sweeter yield of 5.625%

That is wide to the final yield of 5.375% on the larger US$625m bond that priced on May 4.

That deal was pulled this week after the US Treasury named the owners of Grupo Wisa, the Waked family, as narcotics traffickers.

Several investors then dropped out, forcing the bank to make the unusual move of cancelling the post-pricing settlement, which was due to take place on Wednesday.

That Tocumen is returning so soon after the deal went south suggests that the lead underwriter is comfortable in generating sufficient demand under the new terms.

The new bond, which has a 15.9-year weighted average life, is expected to price as soon as Friday.

But amid the ‘Lava Jato’ investigation into corruption in Brazil, and other scandals in the region, the new accusations could give even more investors pause.

“One thing that ‘Lava Jato’ has taught us is that you never know where these things will end up,” said one investor.


Indeed, the contractor on a Tocumen terminal is a subsidiary of Brazil’s Odebrecht, whose former CEO was jailed earlier this year on bribery charges.

Investors have been cutting exposure to Odebrecht risk after the company delayed the release of financial results earlier this month, raising the prospect of a debt acceleration.

“I am concerned around this transaction, given the increased skepticism about other projects that Odebrecht is attached to,” said Sean Newman, senior portfolio manager at Invesco.

Citigroup itself recently dropped out of being a bookrunner on a US$1.225bn debt funding backing the construction of Line 2 on the Panama City metro - a project that had been co-contracted to Odebrecht.

Fitch and S&P Global Ratings have maintained investment- grade ratings of BBB on the Tocumen offering, saying the allegations have not impacted the deal’s credit quality.

Tocumen is expected to terminate its operations with Wisa and find a replacement concessionaire within six months.

While the state-owned airport has added new collateral pledges from advertising and car parking income, they represent just 2% of total revenues versus 7.7% from Wisa. (Reporting by Paul Kilby and John Balassi; Editing by Marc Carnegie)

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