(Adds bank meetings in fourth paragraph.)
Dec. 8 (Bloomberg) -- Lima, Peru’s capital city, plans to sell debt in international markets for the first time by issuing $500 million worth of bonds denominated in soles over the next two years, Mayor Susana Villaran said.
The sale would help finance $1.8 billion in infrastructure projects in the city of 7.5 million people, such as the expansion of a Pacific Ocean beach park called Costa Verde and the building of a highway to better connect commercial and residential areas, Villaran said in an interview at Bloomberg’s headquarters in New York.
“The big picture is how to renew Lima,” Villaran said. “Lima produces almost 50 percent of the national gross domestic product and we have a lack of infrastructure.”
Lima aims to sell bonds maturing in 10 years to 20 years, city Chief Financial Officer Jose Miguel Castro said in the same interview. He and Villaran are in New York to discuss the capital’s financing plans with officials from JPMorgan Chase & Co., UBS AG, Deutsche Bank AG and Morgan Stanley. They are also meeting with potential investors.
“They know Peru, know its potential and are interested in Lima, though it’s still unusual for capital markets to finance bonds issued by municipal governments” in emerging markets, Villaran said. “Lima will be a pioneer in a certain way.”
Fitch Ratings started coverage of Lima’s foreign and local currency debt Sept. 21, assigning a BBB- rating, the lowest investment grade. Fitch rates Peru’s federal-government debt one step higher, at BBB.
Lima sold 20 million soles ($7.43 million) of a 7.19 percent bond due 2013 in July 2008, and an additional 40 million soles of the domestic-market notes a year later. Prices for the securities aren’t available. The municipality’s total debt is less than $200 million, Castro said.
Moscow, rated BBB by Standard & Poor’s and Fitch, sold 407 million euros ($543 million) of 10-year bonds to yield 5.064 percent in 2006. The yield on the notes has since declined 23 basis points, or 0.23 percentage point, to 4.83 percent, according to data compiled by Bloomberg.
The city of Buenos Aires sold $475 million of five-year bonds in March 2010. The yield on the 12.5 percent notes has declined 115 basis points to 11.35 percent. The city is rated B2 by Moody’s Investors Service, five levels below investment grade.
--With assistance from Veronica Navarro Espinosa in New York and John Quigley in Lima. Editors: Brendan Walsh, Marie-France Han
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