Peru Refinances Debt in Buyback Worth Up to $3.97 Billion

Peru tapped the international debt market and offered to repurchase bonds for the second time in four months as it seeks to lock in lower borrowing costs before the U.S. raises interest rates.

The government planned Thursday to back as much as $3.97 billion of debt, the Finance Ministry said in the state newspaper El Peruano. Increased fiscal spending will push the budget deficit to 2 percent of gross domestic product this year, Finance Minister Alonso Segura has said.

The Andean nation began a tender offer to repurchase sol-and dollar-denominated bonds using proceeds from a sale of its 2031 sol notes, according to a statement distributed by PR Newswire. The country is also selling $545 million more of its 2050 dollar securities, according to a person familiar with the matter, who isn’t authorized to speak publicly and asked not to be identified.

Peru offered to repurchase sol bonds, known as soberanos, maturing between 2015 and 2029 and dollar notes due 2016, 2019 and 2025. Banco Bilbao Vizcaya Argentaria SA, Deutsche Bank AG and Morgan Stanley are working on the sale.

The Andean nation sold a record 7.1 billion soles ($2.3 billion) of 10-year sol bonds in October as it bought back shorter-dated securities and issued $500 million of the 2050 notes to finance 2015 spending. The overseas sale was its first since 2012.

Peru is rated by Moody’s Investors Service at A3, the fourth-lowest level of investment grade, putting it in line with Mexico and Malaysia. Standard & Poor’s and Fitch Ratings rank the Andean nation a step lower at BBB+.

Panama sold $1.25 billion of 10-year bonds and Costa Rica issued $1 billion of 30-year bonds earlier this month. Ecuador was said to sell $750 million of five-year bonds abroad Thursday.

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