Brazil May Offer Debt Swap to State Companies in January

Brazil may offer a debt exchange to state companies and public entities in January, giving them a chance to swap their floating-rate bonds for other securities to meet new requirements, Treasury Undersecretary Paulo Valle said.

Valle said in an interview that the exchange could be done in a single transaction and that the government is looking to ensure it doesn’t affect bond prices in the secondary market. He said that the government is considering other options and will discuss them with state-run Banco do Brasil SA (BBAS3) before making a decision.

This exchange “will not have an impact on debt costs or the price of securities,” Valle said in a telephone interview from Brasilia.

Valle said earlier today that the government is forcing public entities and state companies to shift 57.6 billion reais ($32 billion) of floating-rate bonds into fixed-rate and inflation-linked debt. The move is part of an effort to reduce the government’s vulnerability to swings in the benchmark overnight rate, which the central bank lowered 0.5 percentage point today to 11 percent.

To contact the reporters on this story: Arnaldo Galvao in Brasilia newsroom at agalvao1@bloomberg.net Ye Xie in New York at yxie6@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net