The Municipality of Lima’s Bond Offering

Cleary Gottlieb represented BofA Securities, Inc., as initial purchaser, in the structuring of a groundbreaking securitization program originated by the Municipality of Lima for the issuance of up to S/4 billion (approx. $1.08 billion) in Peruvian law-governed bonds and in the first issuance thereunder of S/1.205 billion (approx. $325.6 million) in bonds maturing in 2043.

The offering priced on December 19, 2023, and closed on December 27, 2023.

The program was set up under a Peruvian securitization regime backstopped with the cashflows of certain taxes of the Municipality of Lima. These cashflows were assigned to a Peruvian trust created by it. Bonds under the program were issued by the Peruvian trust. Additionally, the Municipality of Lima has extended a Peruvian law-governed guarantee to cover potential shortfalls in specific trust accounts, including the payment account and debt service reserve account. Credicorp Capital Sociedad Titulizadora S.A. is acting as Peruvian trustee.

The first series of bonds under the program are denominated in Peruvian soles but payable in U.S. dollars. Bonds will clear through the DTC system and are expected to be listed in the Singapore Stock Exchange. The Municipality of Lima intends to use most of the proceeds of the sale of such bonds to finance the Municipality’s development program, including several infrastructure projects. The remainder will be used to prepay certain existing loans of the Municipality and terminate an existing security trust in connection therewith.

This is a truly novel and first-of-its-kind transaction, constituting the first time a Peruvian issuer has accessed the international markets through Peruvian law-governed bonds that clear through the DTC system issued under a Peruvian securitization regime.