Arias Fábrega & Fábrega partner Estif Aparicio talks to Rani Mehta about IDB's $1 billion bond issue in Panama

Can you briefly describe the transaction and the firm’s role on it?

Inter-American Development Bank [IDB] is a public institution created by international treaty to which the Republic of Panama is a party. This was the first time IDB has placed securities in the Panamanian stock market, and the third time a multilateral has done so. CAF was the first multilateral bank to do so and Central American Bank for Economic Integration was the second.
We represented the issuer, IDB and also assisted Citibank, with the consent of all parties, with the listing of the securities with the Panama Stock Exchange.

Did the fact the issuer on this deal was multilateral create any challenges? 

Some of the requirements for the Panama Stock Exchange in connection with the listing of securities were not compatible for multilaterals. For instance, if the issuer is a private issuer, you need to provide the Panama Stock Exchange with the names of the directors of the entity. Additionally, private issuers need to provide copies of personal IDs of officers. In this case, IDB would have needed the IDs of its board of governors, which included, among others, ministers of economy and/or finance of Latin American countries. As you can imagine it would be extremely difficult to obtain personal ID information for every single minister. So we needed to sit down with the Panama Stock Exchange and streamline what the procedure would be. 

Were there any other unusual features to the structure of the deal when compared to an issue by a private sector client?

Normally before every Panama Stock Exchange [PSE] offering takes place, every single issuer needs to deposit with Panama Stock Exchange a physical global security executed by the issuer. In this case, we and Citibank worked out procedures with the PSE so that instead of having to deposit the global the paper note with the exchange prior to the offering, such physical note deposited could be deposited with a custodian outside of Panama, so that through the book-entry system the local exchange had evidence that the notes had been deposited elsewhere and based on that they allowed trading to take place without them actually having the securities deposited in physical form as is normally the case. This aspect required a great deal of discussion and coordination with IDB, the exchange and Citi.

Additionally, even though the IDB had to list their bonds with the Panama Stock Exchange, they did not have to register securities with the regulator. Under Panama law, securities issued by multilaterals to which the Republic is a party are exempt from registration requirements. Based on that, we didn’t have to work with the regulator.

Do you expect more issues by multilaterals on Panama’s stock exchange?

We have been involved in three transactions whereby multilaterals have placed securities in Panama, and the third multilateral has been IDB. This is important because one of the strategic objectives for Panama, is developing Panama’s stock market. My sense is that, in a regional context, multilaterals identify Panama as a market where they could place their securities denominated in US dollars since Panama is a fully dollarised economy. Multilaterals have a development mandate to help develop financial services in countries where they are present. So we think Panamanian stock market will see similar transactions in the near future. Also there’s liquidity in the market.


Inter-American Development Bank $1 billion step-rate bond issue