Venezuela will next week price a $1.5bn 10 year global bond as part of a cash and Brady bond exchange offer.
Holders can either buy the new benchmark 10 year for cash or in exchange for Brady Front-Loaded Interest Reduction Bonds (Flirbs) or Debt Conversion Bonds (DCBs) maturing in 2007 and 2008.
The offer, led by Barclays and Merrill Lynch, will expire next Tuesday.
On Monday the sovereign will announce a minimum spread for the new bond. The price of the Flirbs and DCBs will be set at par and the holders of those bonds will bid for the new 10 year globals at a spread they believe incorporates fair value for the new bond and what they wish to be paid for their Bradies.
The results will be announced on Wednesday.
Based on Venezuela's existing yield curve, bankers expect the new 10 year to be issued at a spread of between 465bp and 470bp.
Yesterday (Thursday) morning Venezuela's 2013 dollar bonds were yielding 8.55% or 456bp over Treasuries.
?The deal makes sense,? said a syndicate manager away from the leads. ?The Bradies they are tendering for are callable at par so there's no upside on those bonds, so they should get good participation from bondholders.?
Latin American corporate bonds are continuing to flow into the market.
Mexican hotel chain operator, Grupo Posadas, is expected to price a $150m seven year non-call five bond today (Friday). Led by Citigroup, it should yield between 8.75% and 9%.
Codelco, the state-owned Chilean copper company, is readying a $500m 10 year deal, led by Citigroup and HSBC.
Still to be announced on the sovereign side is Guatemala, which has mandated Citigroup for a $300m 10 year bond in the 8.5% area.
The Guatemalan deal is expected to hit the market in the week ahead.