A reader shares his not-quite-business as usual experience in the world of emerging markets debt trading.
Not that this is something people outside EM investment world would know, but Brazil a few days ago announced a tender offer for up to $4bio of its outstanding Eurobonds. Holders had to submit their offer prices yesterday afternoon.
The terms of the tender offer called for Brazil to announce the results at 10am this morning. The timing is important, because for the time between when holders tender their bonds and when Brazil decided whether to take them or not, the Brazilians effectively have a free call option on the debt. 10am rolled around and there were no results. 10:30am, still no results. 11:00am, the leads plead for a few more minutes.
I begin to suspect that the Brazilians understand that they have this free option and they are maximizing its value by unilaterally extending the expiry. I call the leads and make this point at 11:30am, when there are still no results and bond prices have moved well above the minimum tender prices. At noon, I start threatening to contact the SEC if my bonds get taken below market. At 12:45pm, the leads say the results will be out imminently.
At 1:00pm on the dot, the results are published, and the Brazilians paid up massively for the bonds. Huh? What was the point of abusing the tender and stretching it out if you then pay over the odds for tendered bonds. Then, suddenly it hit me. World Cup match halftime started at 12:45pm. And ended at 1:00pm. The lazy turds waited until halftime to deal with the tender. Gotta love the Brazilians Treasury's priorities.
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