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Barclays Said to Quit Honduras Bond Sale as Lawsuit Emerges

Barclays Plc (BARC) quit as co-manager of Honduras’s first international bond sale after learning about a pending lawsuit that wasn’t initially included in the sales prospectus, according to three investors who were contacted directly by bankers arranging the deal.

Honduras amended the prospectus for the sale to show that the country faces a $205 million lawsuit tied to a government- owned logging company, according to the revised document sent to investors and obtained by Bloomberg News.

“The Republic was recently made aware that it was substituted as the judgment debtor in a long standing case involving the state-owned” Corporacion Forestal y Industrias Olancho SA, according to the prospectus.

Barclays’s withdrawal took place after government officials met with potential investors. Deutsche Bank AG (DBK) is the lead manager of the deal, according to a person familiar with the offering who asked not to be identified because terms aren’t set.

Brandon Ashcraft, a spokesman for Barclays in New York, declined to comment. Ari Cohen, a spokesman for Deutsche Bank, declined to comment. Officials at Honduras’s Finance Ministry didn’t immediately return an e-mail and call seeking comment.

“You worry that there are more skeletons in the closet,” said Carl Ross, a managing director at Oppenheimer & Co., a brokerage firm. “They probably didn’t want to take that risk.”

Honduras is rated B+ by Standard & Poor’s, or four levels below investment grade and in line with Sri Lanka and Mozambique. The government may sell the securities maturing in 2024 to yield about 7.5 percent, according to the person familiar with the offering.

The Central American country is trying to raise money in the bond market as record-low interest rates in Europe and the U.S. boost demand for higher-yielding emerging-market assets. Guatemala, rated two steps higher than Honduras at BB, sold $700 million of 2028 bonds to yield 5 percent on Feb. 6, according to data compiled by Bloomberg. The yield on the bonds has fallen to 4.95 percent since they were issued.

To contact the reporters on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net; Adam Williams in Rio de Janeiro at awilliams111@bloomberg.net

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

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