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Panama's National Debt and Budgets; Bond Credit Risk Ratings (Fitch/Moody/S&P)

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Panama's Risk Rating Confirmed

Moodys confirmed that the country's investment grade is Baa1 with a stable outlook, arguing that the economy has a solid performance and that it reflects stability at the macro level.

Monday, November 4, 2019

In 2020, Moody's expects the growth of the Panamanian economy to recover to 4.5%, boosted mainly by a full year of production in the copper mine, according to the forecasts of the international agency.

From the Panama Presidency statement:

October 31, 2019. The risk rating agency Moody's Investors Services (Moody's) reiterated the investment grade of the Republic of Panama, placing it at Baa1 with a stable outlook, highlighting also the solid economic performance and macroeconomic stability of the country.

Moody's report shows that the fiscal order and economic reactivation plans presented by President Laurentino Cortizo Cohen's administration in 120 days of management have allowed Panama to maintain its credibility as a dynamic and diversified economy.

In addition, the report is a seal of confidence in the commitment to fiscal consolidation and economic policy strategies advanced by the current administration of President Cortizo Cohen.

Read full statement (In Spanish).

 

https://www.centralamericadata.com/en/article/main/Panamas_Risk_Rating_Confirmed

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Fitch Ratings agency fires warning shot at Panama

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Finance Minister Hector Alexander addresses the National Assembly

Posted 07/11/2019

The approval of the law that raises Panama’s fiscal deficit limits for this year and next will lead to a further weakening of the dynamics of public debt says the Fitch Ratings agency.

"The modification of the deficit ceiling follows a pattern of a decade of postponement in fiscal consolidation goals that has weighed on the credibility of fiscal policy, a key limitation for sovereign rating since the improvement to BBB of the year 2011", the agency said in a statement.

Of the three major rating agencies, Fitch Ratings is the only one that keeps Panama on the BBB stage (the second in what is considered investment grade).

The other two agencies, S&P Global Ratings and Moody's investors Service, raised Panama's rating to BBB + and Baa1 respectively in the first half of this year, r. 

Fitch estimates that the objective of maintaining the relationship between net debt and gross domestic product below 40% will be breached in 2021.

The risk rating scales reflect the opinion of the capacity agencies and the willingness of an issuer - in this case Panama, as the Republic - to meet the commitments of the acquired debts. 

Fitch refers in its most recent statement to the latest modification of the Fiscal Social Responsibility Law, which raises the deficit limits due to a fall in tax revenues and the need to settle debt carried forward.

The new limits were established at 3.5% of gross domestic product (GDP) for 2019, 2.75% by 2020, 2.5% in 2021 and 2% as of 2022. In all cases, the ceilings are higher than those established by law before the modification.

The greater the fiscal deficit in a year, the greater the need for government debt.

 

https://www.newsroompanama.com/business/fitch-ratings-agency-fires-warning-shot-at-panama

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$1 3 billion Panama bond issue  success

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Posted 20/11/2019

Panama on Tuesday, November 19 placed an issue of $1.3 billion, funds that will be used to pay debt bonds that expire in January for "about $1.2 billion," says Minister of Economy and Finance, Héctor Alexander.

It was a "successful" operation because 10-year bonds were placed with a 2.83% coupon and 30-year papers at 3.60%, "historically lower rates" for the Central American country, Alexander stressed after the Council of Ministers.

In July, the Government of Laurentino Cortizo, who assumed power on the 1st of that month placed $2 billion in terms of 10 and 40 years, an "unprecedented" transaction given not only the amount but also the low-interest rates achieved: 3.16% and 3.87% respectively.

Minister Alexander explained that  "This pre-financing allows us to start the year 2020 with a payment program in line with the cash flow we are anticipating in the financial program" next year, when in total bonds will be due for about $2 billion dollars, Alexander said.

The Government reported last September that it authorized raising the amount of debt that the country can issue to the US Securities Commission by $5 billion

According to official data, between 2019 and 2024 issues and loans contracted by Panama for more than $10.8 billion expire.

The balance of Panamanian public debt stood at $28,644 billion at the end of September, which represents about 40% of gross domestic product (GDP), according to the Ministry of Economy and Finance.

The risk rating agency Moody's said in an  October  report that Panama's indebtedness "will likely increase to 45% of GDP by 2021."

"However, this will remain below the median of 53% of the 'Baa' risk rating" enjoyed by the Central American country, Moody's added.

 

https://www.newsroompanama.com/business/1-3-billion-panama-bond-issue-success

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Panama Issues $1.3 Billion in the International Market

Bonds of $300 million maturing in 2030 and $1,000 million maturing in 2053 were issued at rates of 2.83% and 3.60%, respectively.

Wednesday, November 20, 2019

This is the second issue so far of Laurentino Cortizo's administration, since in mid-July the country issued $2 billion in the global market.

From the MEF statement:

November 19, 2019. The Republic of Panama today entered the international capital markets through the reopening of the Global Bonds maturing in 2030 and 2053, as part of the financing plan for fiscal year 2020, which includes the amortization of the Global Bond 2020 maturing in January.

The amount awarded was US$1.3 billion, with US$300 million issued in Bono 2030 and US$1 billion in Bono 2053.

Thanks to the robustness of the order book, receiving offers over US$3,000 million, the Republic was able to issue Bono 2030 at a spread on the reference instrument of the United States of America (UST) of 105 basic points and Bono 2053 at a margin of 135 basic points.
This allowed for historically low yields of 2.83% by 2030 and 3.60% by 2053.

The positive results in the transaction reflect investor confidence in the macroeconomic fundamentals and credit profile of the Republic of Panama, at a time when economic challenges exist in most Latin American countries.

The Vice President of the Republic, José Gabriel Carrizo, said that the issuance of bonds today, is a sign of the "confidence of capital markets that look positively on the projection and management of the administration of President Laurentino Cortizo. This motivates us to continue working in this direction, being transparent, accountable and being in permanent and close contact with people."

On the other hand, the Minister of Economy and Finance, Hector Alexander, emphasized that he has a specialized team that monitors the capital market and takes advantage of the best time to make bond issues. "Today's issue was successful, the US$1.3 billion was issued at a lower interest rate than that obtained in the historical issuance of US$2 billion last July," he said.

"With this money the country will attend the bonds maturing in January 2020, which total about US$1.2 billion, an operation we call prefunding. At the same time, we are pleased with the operation because the market perceives us as a compliant country," said Minister Alexander.

 

https://www.centralamericadata.com/en/article/main/Panama_Issues_13_Billion_in_the_International_Market

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When you compare Panama's economy to others in the region, it looks pretty good.

This bond issue looks like it's going to pay off a maturing bond next year, but financing this forward over the next 10 to 25 years at this cost is a historical bargain.

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Panama debt  passes $30 billion mark

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Posted 24/12/2019

The balance of the debt of Panama’s non-financial public sector reached $30,3704 billion at the end of November, reports the Ministry of Economy and Finance.

In a single year, the debt increased by $4.194,7 billion, a figure big enough to enable the building of two  Metro lines.

Debt grew in the last decade due to a considerable increase in public spending, which generated fiscal deficits.

 In the second half of the year alone, the government of Laurentino Cortizo has issued in the international markets $3.3 billion to cover different expenses and obtain in advance resources to pay a bond that expires in January.

Another $888 million that the Government is placing in Notes and Bonds to pay back debts with banks, the Social Security Fund and the National Bank of Panama will be  added to the debt

 

https://www.newsroompanama.com/business/panama-debt-passes-30-billion-mark

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OPINION: Drowning in debt and corruption

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Posted 24/12/2019

The public debt of the State, excluding state-owned companies ENA, ETESA, and Tocumen, exceeded 30 billion dollars last November. This is not cause for celebration, or cause for holidays. On the contrary, it must be one of the fundamental concerns of the citizens of this country, to ensure that the State is administered with integrity, frugality and good sense. 

In just a decade, public debt tripled. Tax collections increased, Canal revenues increased, but the debt was inflated, as were the cases of great corruption with public funds. The result is an economy dependent on government megaprojects, and a population addicted to clientelism, either the sale of subsidized hams or, to gifted homes.

 We are at a level of debt, for which we need more indebtedness, to pay the state obligations. We can still rationalize public spending, and instead of filling government offices with political appointments, highly qualified personnel and entrepreneurs must be trained to build up a successful private sector-.LA PRENSA, Dec 24

 

https://www.newsroompanama.com/opinion/opinion-drowning-in-debt-and-corruption-1

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Multiple challenges for Panama government in 2020

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Posted 01/01/2020

Some of the main challenges facing the Lorentino Cortizo government in  2020 include:.

The debt of the Non-Financial Public Sector which reached the historically high figure of  $30.370.4 billion in November 2019,

. Between October and November alone the debt increased $ 1,728.4 billion.

The strategy of the Ministry of Economy and Finance (MEF) has been to contract debt to pay debt. In other words, money has been borrowed to settle outstanding debts from suppliers of the State, and even the Colon Free Zone.

This has been achieved through the issuance of Treasury Bonds and loans, which the MEF highlights were in many cases achieved with low rates. It is money that Panama will have to pay later and that could limit the investment capacity during the coming years, especially if it is not accompanied by solid economic growth says a TVN report.

Panama needs access to international financing and positive evaluations of international organizations. Along these lines, the government presented to the Assembly bills such as the creation of a Superintendency of Non-Financial Subjects that, together with other actions, seek to meet the standards against money laundering and terrorist financing of organizations such as the ECD and the International Financial Action Task Force (FATF).

Economic growth The annual Gross Domestic Product (GDP) of the country was 3.7% in 2018 and the MEF estimates that it will be around 3.5% by 2019.

Unemployment was 7.1%, according to the last measurement made in August 2019. Informal employment increased 1% between 2018 and 2019, and there are currently 716,000 people who remain without formal jobs

On the other hand, foreign direct investment grew. In the first months of 2019, it increased by 15.9%, compared to the same period of 2018. In total, from January to September, $4,735.2 billion in foreign investment entered the country, according to the Comptroller General.

The main challenge for 2020 will be to generate jobs and boost the economy, fulfilling the commitments of debt acquired and fiscal discipline. The government has put on the table tools such as Public-Private Partnerships. It will be necessary to see the effect of the projects that arise, and to determine if they manage to benefit the majority of the Panamanian population.

 

https://www.newsroompanama.com/business/multiple-challenges-for-panama-government-in-2020

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Panama   public debt surges past $31 billion

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Posted 24/01/2020

The balance of the debt of Panama’s non-financial public sector closed 2019 at $ a record 31,018.5 billion, reports the Directorate of Public Financing.

At the end of 2018, the country's commitments were  $25,686.9 billion, so in a single year, public sector debt increased by $5,331.6 billion.

The bulk of the increase occurred in the second half of the year, under the Cortizo administration ..

The Government chose to issue national and international debt to cover the budgetary needs of 2019 and to settle accounts with banks, Social Security Fund and various government providers that were not included in the balance sheets.

This exercise of balancing outstanding accounts has resulted in an increase in registered debt, which by the end of 2019, will have exceeded 40% of gross domestic product. Reports La Prensa/

Panama   public debt surges past $31 million

 

https://www.newsroompanama.com/business/panama-public-debt-surges-past-31-billion

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Fitch  moves Panama outlook from stable to negative

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Posted 07/02/2020

The Fitch rating agency has revised negatively the perspective of Panama's debt rating. The review reflects the "marked deterioration in fiscal deficits and the significant increase in government debt levels, linked to the commitments carried out by the previous administration and by higher levels of the fiscal deficit under a modified fiscal social responsibility law."

In addition, a greater than anticipated slowdown creates additional challenges for deficit reduction. The agency maintained Panama's rating level at BBB, but the outlook goes from stable to negative, which could be the prelude to a downgrade in the rating.

 The review reflects the "marked deterioration in fiscal deficits and the significant increase in government debt levels, linked to the commitments carried out by the previous administration and higher levels of the fiscal deficit under a modified fiscal social responsibility law," said. the agency.

In addition, a greater than anticipated slowdown creates additional challenges for deficit reduction. Fitch notes, in a Thursday, February 6statement that the administration of Laurentino Cortizo revealed that in the previous government, debt accumulation and discretionary management were used to meet deficit limits. The debts carried forward, equivalent to 1.8% of the gross domestic product (GDP), were settled through the issuance of debt, and accounting will be allocated to the years in which the commitments were acquired, which will raise the deficits recorded in the previous years .

The agency recalls that the new administration raised the fiscal deficit limit to 3.5% of GDP, which qualifies as a weak starting point for planned fiscal consolidation or deficit reduction, a consequence of the "weak credibility of fiscal policy. in past administrations, an issue previously highlighted by Fitch. " Being a dollarized country and having no independent monetary policy, "improving the strength and credibility of the fiscal framework is particularly important for Panama's risk rating," the agency says. The last change in the deficit limits (from 2% to 3.5%) occurred just one year after a similar movement in 2018. "The modification of the deficit ceilings in the fiscal rule follows a pattern that lasts a decade of postponement of the objectives of consolidation and stabilization of public debt, despite high growth rates. "

 Usually, the higher the risk rating of a country, the better interest rates it gets on its debt issues. An eventual reduction in Panama's ratings could, therefore, mean that the country must pay higher interest rates.

 

https://www.newsroompanama.com/business/fitch-moves-panama-outlook-from-stable-to-negative

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Panama gets  international vote of confidence

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President Cortizo

Posted 27/03/2020

In the midst of the crisis caused by the Covid-19 pandemic, Panama went to seek economic resources from international markets. This was not an exhibition of shyness since the issuance of $2.5 billion was made over 30 years. Strong support was obtained from the international market, which constitutes a vote of confidence in our country. We are all winners with this successful management of the National Government. However, it is fair to demand transparency and a great deal of sense in how these funds are used. The good financial name and reputation of being a solid customer have taken 30 years to build. We cannot allow Creole politicking, conflicts of interest or waste to take advantage of this money so urgently needed for the social peace and economic tranquility of Panamanians. The government of President Laurentino Cortizo has appropriately handled the health challenge, and it is now key that it validates and expose transparency and frugality in the spending of these funds. The world trusted us, now we have to prove that it was right.- LA PRENSA, Mar. 27

 

https://www.newsroompanama.com/opinion/panama-gets-international-vote-of-confidence

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Panama Issues $2.5 Billion in Bonds

The government issued $2.5 billion in sovereign bonds in the international market, maturing in 2056 and with an interest rate of 4.5%.

Friday, March 27, 2020

It is worth noting that this is the first sovereign bond issue since the beginning of the Covid-19 crisis in all of Latin America and that this transaction was executed with great success, exceeding more than 3 times the amount issued, reported the Ministry of Economy and Finance.

The official statement said that "... The success of this issuance ratifies the confidence in the government of Panama for the management of its public finances.

With these funds we will ensure additional resources to attack this health crisis and other needs of the population.
"

Covid19: How do the outlook for business in Panama change?

We prepared for our clients the report "Information System: Impact Analysis of Covid-19 on Business" that answers these and other questions in times of uncertainty.

Click here to request access to this report.

 

https://www.centralamericadata.com/en/article/main/Panama_Issues_25_Billion_in_Bonds

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La encrucijada de más de $260 millones en bonos que vencen el próximo trimestre

Un proyecto de ley busca prorrogar el pago del capital a los tenedores de bonos corporativos que cotizan en la Bolsa de Valores de Panamá. La SMV analiza la situación, mientras que especialistas opinan que las empresas deben cumplir con su compromiso

Por Adelita Coriat

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La SMV tomaría las acciones que amerite la actual situación de emergencia.Archivo La Estrella de Panamá

El superintendente del Mercado de Valores, Julio Justiniani, discute con la junta directiva de la entidad y con el Ejecutivo un proyecto de ley que pretende prorrogar automáticamente el pago de capital, mas no de los intereses, de los bonos que vencen entre el 1 de abril y el 30 de septiembre, con la opción prórroga por periodos adicionales.

En los próximos meses vencen una serie de bonos corporativos emitidos que cotizan en la Bolsa de Valores de Panamá y tendrán que hacer frente a los compromisos de pago de capital e intereses. Según datos de la Superintendencia del Mercado de Valores (SMV), en abril expiran $57.7 millones, en mayo $52.7 y en junio $149.8 millones.

“Ante la situación por la que atraviesa el país, es muy probable que los tenedores de bonos pidan su dinero al momento del vencimiento de la emisión, y cuando esto ocurra, podría ocasionar un descalce porque las empresas no van a tener la plata completa, algunas de ellas no lo tendrán aunque las grandes pueden soportarlo”, indicó a La Estrella de Panamá Fernando Sucre, presidente de Central Fiduciaria y agente de pago de emisiones.

Con esto en mente, Sucre redactó un proyecto de ley que presentará ante la Asamblea Nacional con el que se pretende prorrogar el pago de capital de los bonos cuyo vencimiento sea en el periodo mencionado.

El documento, al que tuvo acceso este diario, de dos artículos, autoriza a la Superintendencia del Mercado de Valores a tomar las medidas necesarias para la protección y mitigación de los efectos causados, o que puedan causarse al mercado de valores, dentro del sistema financiero nacional por la presente situación de la pandemia y que podría llevar a prorrogar por periodos adicionales lo establecido en el párrafo anterior.

“Todo emisor autorizado por la SMV que cotice en la bolsa y que no pueda hacer frente a los intereses o dividendos de sus respectivos valores, deberá solicitarle a la SMV la autorización para suspensión de pagos, la cual deberá estar sustentada con toda aquella documentación que dicha autoridad requiera”, se lee en la propuesta.

Justiniani aún no tiene una opinión formal de la propuesta. La SMV previó este escenario y el 20 de marzo emitió el acuerdo 3-2020 por medio del cual estableció medidas temporales para el registro abreviado de las modificaciones de ciertos términos y condiciones de la oferta pública de valores registrados en la SMV para la fecha de vencimiento de los valores, fechas, formas de pago de intereses o de capital, fecha de redención de valores, forma o causales para solicitar redención de los valores u otros pagos relacionados.

Este instrumento de la SMV no convence a Sucre. Primero porque establece que hay que ir a la SMV para aprobar cualquier cambio. En vez, con el proyecto quedan automáticamente prorrogadas las emisiones sin tener que acudir al regulador para que autorice la medida.

Lo que explica Sucre es que muchas emisiones están garantizadas con hipotecas sobre bienes inmuebles y pagarés, ninguna con efectivo. Lo que significa es que si las empresas que deben pagar el capital en los términos fijados caen en falta (default), se tendrían que liquidar los bienes que garantizan los bonos o las acciones, y en este momento no se puede hacer eso ante la situación por la que atraviesa el país. Por ello, pedimos aplazar el vencimiento por 90 días mientras todo regresa a su curso normal”.

Hay quienes opinan que si la empresa no cumple con su responsabilidad para con los tenedores de bonos, pueden perder credibilidad en el mercado, y eso no le conviene.

“No olvidemos y no dejemos desamparados a los pequeños ahorristas que incluyen a los que depositaron su confianza en el mercado de valores, no los olvidemos. El sistema y todos nos debemos a ese ahorrista que están cotizando en el país”, expresó el economista Felipe Chapman.

La SMV deberá valorar qué hacer con la propuesta, pues es la entidad que debe velar por los intereses de quienes confiaron en las empresas que emitieron bonos y que esperan recibir su dinero al vencimiento. Un economista consultado indicó que esto no es tan simple como ver en blanco y negro, tal como se pretende exponer. No comparte la idea de prorrogar, un tema que merece verse con cuidado. Asegura que los bonos tienen un fondo de amortización y la empresa debió separar el repago del compromiso. “Es difícil de creer que con un mes que no hayan ventas se quedó sin el respaldo”, indicó el especialista que pidió obviar su nombre. En todo caso, añadió, lo que se puede es hacer una nueva emisión de bonos a una tasa inferior. “Lo correcto es pagar los bonos e inmediatamente sacar una nueva emisión. Las tasas dependerán de la industria en la que se mueva la empresa, y esta reflejará el riesgo de la empresa”, acotó.

La SMV cuenta con información detallada de vencimiento de las emisiones, a corto, mediano y largo plazo y monitorea el desempeño del mercado en miras a realizar los ajustes necesarios y velar por la protección al publico inversionista, así como también apoyar a los emisores. “En marzo los emisores efectuaron pagos por $133 millones a diferentes inversionistas, correspondientes a sus valores en circulación. Hemos sostenido conversaciones con varios emisores y la mayoría tiene reservas para afrontar la situación, sin embargo, hay que considerar si la crisis se extiende más de lo previsto, por lo que estamos en constante análisis para presentar alternativas que permitan a las empresas ajustarse al flujo de efectivo acorde a la coyuntura, y de esta forma fortalecer el sistema y que pueda sobreponerse a esta situación jamás experimentada en el mundo”, indicó Justiniani.

El superintendente añadió la necesidad de tener presente que por la cuarentena declarada, “la mayoría de las empresas han reducido su capacidad operativa, por ende sus ingresos y esto es entendible, por lo que como medida preventoria la SMV aprobó el acuerdo 3-2020 que permite la modificación de términos y condiciones de sus prospectos iniciales y emisiones en circulación. El cambio de términos y condiciones lo contempla la Ley de Valores, sin embargo, el acuerdo modifica las normas para realizar el cambio y establece un procedimiento simplificado, expedito y notificado vía electrónica. Siempre que cuente con la aprobación del 75% de los inversionistas”, exclamó Justiniani.

Este medio conoció que la SMV ha detectado muy pocas empresas, contadas con una mano, que atraviesan una situación financiera delicada.

En esta vía, el temor podría ocurrir que los portadores de los bonos o el resto de la industria perciba que se afecten porque no tienen soporte. Por más pequeños que sean, pueden generar un efecto negativo y contagiar al resto. Pese al acuerdo que ha emitido la SMV, hay sectores particulares con cierto tipo de industrias que se mantienen con el flujo de efectivo. A pesar de que hay unas muy robustas, el negocio se nutre de ingresos diarios, pero al final de la historia es muy difícil contar con un colchón por seis meses sin recibir el capital para hacer los pagos correspondientes.

En la SMV están registrados 230 emisores. En tiempos normales, cuando se acercaba al fecha de vencimiento del bono, los encargados llamaban a sus clientes y estos accedían a la renovación de los mismos. No obstante, es lógico pensar que ante la pandemia, algunos requieran el pago completo y pedirán el dinero que la empresa mantiene en otro tipo de inversiones.

Cuando se emiten bonos, mecanismos de financiamiento de las empresas, se estila que se proporcionen como garantías pagarés, hipotecas y bienes inmuebles.

 

Moderator comment: Below is an unedited automated translation of the above news article.

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The crossroads of more than $ 260 million in bonds due next quarter

A bill seeks to extend the payment of capital to holders of corporate bonds that are listed on the Panama Stock Exchange. The SMV analyzes the situation, while specialists believe that companies must fulfill their commitment

By Adelita Coriat
Updated 04/03/2020 06:08

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The SMV would take the actions that the current emergency situation warrants.Archivo La Estrella de Panamá

The Superintendent of the Securities Market, Julio Justiniani, discusses with the board of directors of the entity and with the Executive a bill that intends to automatically extend the payment of capital, but not of interest, of the bonds that mature between 1 April and September 30, with the option of extension for additional periods.

In the coming months, a series of corporate bonds issued, which are listed on the Panama Stock Exchange, will expire and they will have to face commitments to pay capital and interest. According to data from the Superintendency of the Stock Market (SMV), $ 57.7 million expire in April, $ 52.7 million in May and $ 149.8 million in June.

"Given the situation the country is going through, it is very likely that bondholders will ask for their money when the issue expires, and when this occurs, it could cause a mismatch because companies are not going to have full silver, some of them will not have it although the big ones can bear it, ”Fernando Sucre, president of the Central Trust and emissions payment agent, told La Estrella de Panamá.

With this in mind, Sucre drafted a bill that he will present before the National Assembly with the intention of extending the principal payment of the bonds whose maturity is in the mentioned period.

The document, to which this newspaper had access, of two articles, authorizes the Superintendence of the Stock Market to take the necessary measures for the protection and mitigation of the effects caused, or that may be caused, to the stock market, within the financial system national due to the present situation of the pandemic and which could lead to an extension for additional periods of what is established in the previous paragraph.

"Any issuer authorized by the SMV that is listed on the stock exchange and that cannot meet the interests or dividends of their respective securities, must request from the SMV the authorization for suspension of payments, which must be supported by all the documentation that said authority requires ”, the proposal reads.

Justiniani does not yet have a formal opinion on the proposal. The SMV foresaw this scenario and on March 20 issued the agreement 3-2020 through which it established temporary measures for the abbreviated registration of the modifications of certain terms and conditions of the public offer of securities registered in the SMV for the expiration date. of the securities, dates, forms of payment of interest or principal, date of redemption of securities, form or grounds to request redemption of the securities or other related payments.

This SMV instrument does not convince Sucre. First, because it establishes that you have to go to the SMV to approve any change. Instead, the project automatically extends emissions without having to go to the regulator to authorize the measure.

What Sucre explains is that many issues are guaranteed with mortgages on real estate and promissory notes, none with cash. What it means is that if the companies that must pay the capital on the fixed terms fall into default (default), the assets that guarantee the bonds or the shares would have to be liquidated, and at this time, this cannot be done in the situation through which the country crosses. Therefore, we ask to postpone the maturity for 90 days while everything returns to its normal course. ”

There are those who believe that if the company does not fulfill its responsibility towards the bondholders, they may lose credibility in the market, and that does not suit them.

"Let us not forget and do not leave the small savers who include those who put their trust in the stock market helpless, let us not forget them. The system and we all owe it to that saver who is trading in the country, ”said economist Felipe Chapman.

The SMV should assess what to do with the proposal, since it is the entity that must look after the interests of those who trusted the companies that issued bonds and who expect to receive their money at maturity. A consulted economist indicated that this is not as simple as seeing in black and white, as it is intended to expose. He does not share the idea of extending, a subject that deserves to be viewed carefully. He assures that the bonds have an amortization fund and the company had to separate the repayment from the commitment. "It is hard to believe that with a month that there were no sales, he was left without support," said the specialist, who asked to forget his name. In any case, he added, what you can do is make a new bond issue at a lower rate. “The correct thing is to pay the bonds and immediately take out a new issue. The rates will depend on the industry in which the company moves, and this will reflect the risk of the company, "he said.

The SMV has detailed information on the maturity of the issues, in the short, medium and long term and monitors the performance of the market in order to make the necessary adjustments and ensure the protection of the investing public, as well as supporting issuers. “In March, the issuers made payments of $ 133 million to different investors, corresponding to their outstanding securities. We have held conversations with several issuers and most have reservations to face the situation, however, we must consider whether the crisis is more extended than expected, so we are constantly analyzing to present alternatives that allow companies to adjust to the flow of cash according to the conjuncture, and in this way strengthen the system so that it can overcome this situation never experienced in the world, "said Justiniani.

The superintendent added the need to keep in mind that due to the declared quarantine, “most companies have reduced their operating capacity, therefore their income and this is understandable, so as a preventive measure the SMV approved agreement 3-2020 that allows the modification of terms and conditions of its initial prospectuses and outstanding issues. The change of terms and conditions is contemplated by the Securities Law, however, the agreement modifies the rules to make the change and establishes a simplified, expedited and notified procedure electronically. As long as it has the approval of 75% of the investors, ”Justiniani exclaimed.

This medium learned that the SMV has detected very few companies, counted on one hand, that are going through a delicate financial situation.

In this way, fear could arise that the bondholders or the rest of the industry perceive that they are affected because they are not supported. As small as they are, they can have a negative effect and infect the rest. Despite the agreement that the SMV has issued, there are particular sectors with certain types of industries that keep up with the cash flow. Although there are very robust ones, the business thrives on daily income, but at the end of the story it is very difficult to have a mattress for six months without receiving the capital to make the corresponding payments.

230 issuers are registered in the SMV. In normal times, when the bond maturity was approaching, managers would call their clients and they would agree to renew them. However, it is logical to think that in the face of the pandemic, some require full payment and will ask for the money that the company maintains in other types of investments.

When bonds, financing mechanisms of companies are issued, it is customary that they be provided as promissory notes, mortgages and real estate.

 

https://www.laestrella.com.pa/economia/200403/encrucijada-260-millones-bonos

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Moody’s rates Panama outlook stable

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Posted 16/04/2020

The Moody's Investors Service agency on Wednesday, April 15 ratified Panama's risk rating at Baa1 with a stable outlook.

Moody's estimates that the coronavirus pandemic will impact the Panamanian economy in 2020 with an estimated 1% contraction in gross domestic product (GDP). Both the International Monetary Fund and the World Bank calculate that the contraction will be 2%.

"Panama has in its favor the trajectory of sustained economic growth with high levels of investment and the role that the interoceanic canal has for world trade," said Panama’s Ministry of Economy and Finance.

 

https://www.newsroompanama.com/business/moodys-rates-panama-outlook-stable

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Moderator comment: This news article could also have been posted in the Covid-19 topic. Sidebar comment as well: Panama, like almost every other country in the world, is taking on huge national debt at a time when revenues are dramatically decreasing. The long term impact of the Covid-19 pandemic is yet to be experienced.

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$515 Million Approved for Healthcare System

The IMF approved a loan in favor of the Panamanian government, whose funds will be used to finance health expenses and support the vulnerable population affected by the covid.19

Friday, April 17, 2020

The International Monetary Fund (IMF) approved Panama's request for emergency financial assistance under the Rapid Financing Facility (RFF) of approximately $515 million to meet urgent balance of payments needs arising from the outbreak of the covid-19 pandemic, the international body reported.

The document states that "... The IRF provides timely resources to the authorities needed to mobilize essential health and support expenditures related to covid-19 to vulnerable populations. The authorities also seek the support of other multilateral institutions."

The publication dated April 16 adds that "... To absorb the macroeconomic shock, the government of Panama appropriately requests to exceed the fiscal deficit limit under the Social and Fiscal Responsibility Law (with legal limits becoming binding again from 2021 onwards). The authorities announced a package of fiscal measures to increase health spending and increase transfers to the poor."

 

https://www.centralamericadata.com/en/article/main/515_Million_Approved_for_Healthcare_System

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OPINION: Magicians to handle public debt

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Posted 31/07/2020

f you spend more than you earn, you have to go into debt to pay it. The Ministry of Economy and Finance (MEF) has said that the Government intends to spend $766 million more in 2021 than it budgeted for in 2020. By magic, our government will be able to spend 3.3% more seamlessly. And the deficit? And the debt? We also want to drink from that cup. Interestingly, in the press release, the ministry indicated that "the limitations on the budget are real and the current room for maneuver is narrow, given that the size of the budget is influenced in a significant way by income."Limitations, it reads, luckily! The spreadsheet supports everything: you put in the amount you need and - soon! - the economy and revenue grow. Apparently someone has an ace up their sleeve.

Fiscal deficits involve debt. More debt means more interest that, without cuts in expenses or increases in income, carries more debt. And we will definitely need magicians to avoid creating a snowball of unsustainable debt. But, as Keynes pointed out, what does it matter if, "in the long term, we are all dead." LA PRENSA, Jul. 31

 

https://www.newsroompanama.com/opinion/opinion-magicians-to-handle-public-debt

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