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Portugal bond swap reduces repayments due in 2014, 2015

Published on 03/12/2013

Portugal said on Tuesday it had swapped 6.64 billion euros ($9.0 billion) in bonds coming due in the next two years in a move intended to ease its financing costs as it exits from an EU-IMF rescue programme next year.

Portugal is slated to exit its programme in June when the recession hit country will be expected to raise financing alone on the markets, but faced refinancing 27 billion euros in bonds coming due in 2014 and 2015.

The country’s IGCP debt agency offered to switch those bonds for ones maturing in 2017 and 2018 with higher returns.

“The operation went well. Portugal reduced its 2014 reimbursements by around 2 billion euros and those for 2015 by more than 4 billion,” said Filipe Silva, a bond strategist at Banco Carregosa.

Portugal secured a 78-billion-euro ($104 billion) economic bailout by the International Monetary Fund, European Commission and European Central Bank in May 2011.

Auditors from the IMF, ECB and European Commission are set to begin on Wednesday another review of Portugal’s efforts to bring its finances under control before releasing more bailout funds.

In October 2012, Portugal offered a first debt swap programme and in May sold its first long-term debt bond, though the operation was largely a test and at a minimised risk to investors.