(Bloomberg) -- JPMorgan Chase & Co. is lending Panama $1 billion to help it with liquidity needs for its 2024 budget, according to a resolution published in the official gazette.
The three-year loan will carry an interest rate of 150 basis points over the six-month secured overnight financing rate. That can be adjusted under certain conditions, including new debt issuance or a credit downgrade, according to the resolution.
The transaction adds to a move by Panamanian officials to reassure investors that they’re committed to fiscal and economic growth targets to quell growing concern about the country losing its investment-grade credit rating. Fitch Ratings cut the country to junk this year, while S&P Global Ratings and Moody’s Ratings have it as investment grade.
The loan signals Panama’s commitment to avoid locking in high market rates for long periods of time at the cost of more expensive shorter-term issuance, Steven Palacio, an economist with JPMorgan’s research group, wrote in a note Friday. The strategy allows the nation to borrow at lower yields once it reestablishes market confidence, he said.
The loan is part of a previous authorization that gives the Finance Ministry authority to sign financing agreements with different local and international entities for as much as $3 billion.
“This facility will help meet the $1.25 billion in external bonded debt amortization due in 2025,” according to Ricardo Penfold, a managing director at Seaport Global in New York. It’s possible that “the government’s strategy is to stay out of the external bond market as much as possible.”
(Updates with analyst comment starting in fourth paragraph.)
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