(Bloomberg) — A group of some of the world’s largest banks has bought Colombian sovereign bonds with a face value of $5.4 billion, closing a tender offer that is likely part of a sweeping debt management operation by the South American nation.
Banco Bilbao Vizcaya Argentaria, Banco Santander, BNP Paribas, Citigroup Global Markets, Goldman Sachs Group Inc. and JPMorgan Chase & Co. bought notes across Colombia’s US dollar-denominated curve maturing from 2027 to 2061, according to a statement by their depositary agent.
The purchase is intended to hedge potential total return swap transactions between the banks and Colombia, allowing the country to save coupon payments while paying interest to the banks that bought its debt. Although the precise terms of the swaps are unclear, they may give Colombia more flexibility by allowing it to make interest payments in non-dollar currencies.
The aggregate purchase price for the bonds was around $4.6 billion, not including accrued and unpaid interest, the banks said, showing they paid a discount to face value. The agreement binds the banks and Colombia to one or more total return swap transactions, they added.
The move is part of a larger financing plan by the Colombian government as it attempts to ease its debt burden. The tender offer was announced only weeks after Public Credit Director Javier Cuellar said the government is seeking to borrow as much as $10 billion in Swiss francs to repurchase more expensive liabilities in a bid to rein in its debt costs.
Colombia is facing growing fiscal strain, fueled by moves by President Gustavo Petro to increase spending as he enters his final year in office. The budget deficit is expected to reach 7.1% of gross domestic product in 2025, the widest gap since the pandemic.
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