a primer on panama's debt capital markets

RESEARCH

A Primer on Panama’s Debt Capital Markets

Noe Munoz, CFA +507 2657750

[email protected]

MMG BANK

AHEAD OF THE CURVE:

Pg. 1 Pg. 2 Pg. 3

Pg. 4 Pg. 5 Pg. 7 Pg. 8

Pg. 9

Pg. 10 Pg. 11

MMG Bank Corporation MMG Tower, Piso 10

Urbanización Marbella Panamá, Republica de Panamá

+507 2657600 www.mmgbank.com

Introduction Market Overview Government Debt Market Corporate Debt Market

Issuers Sector Distribution Credit Ratings Yield Trends

League Tables Corporate Debt Market Government Debt Market

Other Charts & Figures

January 20, 2012

See End of Document for Important Disclosures

MMG BANK

INTRODUCTION

The primary objective of this report is to serve as an introduction to many of the important facets of Panama’s debt capital markets in order to provide a context for evaluating investments. This report answers fundamental questions regarding the composition of the corporate debt primary market, its issuers, maturities, sector distribution, credit ratings, and yields as well as discusses recent trends in those factors. It also includes information on the domestic government debt primary market as an added source for context.

In drafting this report we gathered data on corporate debt primary market transactions since 2010. Rather than using registration information provided by the local securities commission (Superintendencia del Mercado de Valores de Panama), we gathered data on individual transactions as provided by the exchange (Bolsa de Valores de Panama). Because companies typically register their issues in “shelf” format, issues may be placed over very long periods, including several years, and therefore registration amounts are unreliable indicators of market composition as they may differ significantly from actual placements. In addition issues must be placed through the exchange in order for interest income and capital gains to be completely exonerated from taxation. Consequently, we believe the data provided by the exchange provides a comprehensive and accurate picture of the primary market.

In various segments of our analysis, we present the effects of excluding the ENA Sur Trust bonds issued in 2011 in order to provide a more comparable analysis with historical information. Because of ENA Sur’s government ownership and the issue’s larger issue size, the bonds should be arguably considered in a category of their own. We also frequently cite the preponderance of the financial sector in issuance activity, which undoubtedly presents a challenge for diversification.

We focus our report on the primary market, because it has historically presented the most relevant investment universe. Volume in the secondary market has been negligible with 80% of all volume occurring in the primary market. In the corporate debt market, there are several factors which have inhibited liquidity including the small size of issues, a problem augmented by companies utilizing “shelf” registrations to issue debt at many different maturities. Another important factor has been the absence of callability protection for investors. Whereas some issues have included a two year call protection, many issues have been callable at any time, a factor which has prevented prices to reach levels that may have incentivized trading. In the domestic government bond market, factors have included a concentration of issuance in short term maturities which were generally purchased as “hold to maturity” investments.

We believe potential investors should continue to view the primary market as the investable universe, particularly for corporate debt. In the government debt universe, however, there have been important developments which have now created a secondary market. The establishment of a market makers program combined with longer term issuance has been very successful in enhancing liquidity. We believe this program to be a significant first step that will aid in the transition of a market dominated by a “buy and hold” approach to a more risk-oriented, portfolio management focus that is an essential component for improved liquidity in our markets.

Page 1 January 20, 2012 A Primer on Panama’s Debt Capital Markets

2010 Com. Paper/Bills Bonds Perpetual/Pfds

Corporate Issues 388 50% 505 47% 207

Mortgage Backed 96 9%

Government Debt 387 50% 466 44%

Total 775 1,067 207

1,099

Total debt issuance for 2011 recorded an increase of 19% ($391 million) reaching $2.44 billion in total placements. Though government issuance remained flat for the year, total corporate debt issuance increased 44% driven primarily by the $395 million placement of the public thoroughfare issues of ENA Sur Trust.

In terms of the composition of the primary issue market, corporate debt remains the primary source of issuance with a market share of 65% versus 41% in 2010. However, a reclassification of bonds issued by ENA Sur, an entity whose government ownership warrants investors consider its bond at the very least government related, would split issuance evenly between corporate and government debt. Mortgage-backed securities were absent in 2011 as commercial and residential mortgage markets are predominantly financed with traditional on balance sheet bank lending. Consequently, investors desiring exposure to real estate related issues are limited to various corporate issues, which include real estate collateral or guarantees, and real estate development bonds.

MARKET OVERVIEW

853

861 2,049

2,440

0

500

1,000

1,500

2,000

2,500

3,000

2010 2011

Corporate Mortgage Government

1,099 1,579

65%

35%

2011

Total Debt Issued ($ millions) Figure 1:

Sources: BVP, MMG Bank

54%

5%

41% 2010

Market Commentary

Issue Types

Both the corporate and government sectors have increased issuance of medium term securities as record low rates have incentivized refinancing to longer terms. Corporate bond issuance more than doubled while government bond issuance increased 15% for the year. In the government sector, the totality of bond issuance for the year occurred in the new 5% 2018 issue. For 2012 we expect a continued shift to longer duration issues from both the corporate sector taking advantage of historically low rates and the government sector which has indicated as a priority refinancing external debt through the domestic markets.

Record low interest rates have driven

longer term issuance

Figure 2: Distribution by Issue Type ($ millions)


2011 Com. Paper/Bills Bonds Perpetual/Pfds

Corporate Issues 330 51% 1,133 68% 117

Government Debt 323 49% 538 32%

Total 653 1,671 117

Total Issuance in 2011: $2.44 Billion

MMG BANK Page 2 January 20, 2012 A Primer on Panama’s Debt Capital Markets

45%

55%

2010

37%

63%

2011

466 538

853 861

0 100 200 300 400 500 600 700 800 900

1,000

2010 2011

Bills (Letras) Bonds (Notas)

Though total government debt issuance was flat year on year, the duration of domestic government debt was extended. During 2011 the Ministry of Finance issued $538 million of a 7 year bond as part of its plan to reduce dependence on external funding through increased domestic issuance. The plan also established a market maker program to provide liquidity to government debt issues (the program is currently limited to the 2013 & 2018 bond issues only). The market maker program was launched in June 2011 with Citibank, HSBC, and MMG Bank participating as lead market makers, and initial results have been very successful. Total volume in the secondary market registered $265 million in the six months after the program’s inception versus a combined $73 million in the 18 months prior.

GOVERNMENT DEBT MARKET Market Commentary

387

Government Debt Issuance ($ millions) Figure 3:


Yield Trends

Alongside global interest rate trends, Panama’s domestic short term yields have trended to record lows over the past year. Because domestic bills (Letras del Tesoro) are rarely traded in the secondary market, we observe yields on new issues in order to view trends in the short-term rate market. Albeit issues placed in the last quarter, short term rates have generally trended lower since 2010. Beginning in October we observed a significant increase in short term rates that partially reflected lower demand rather than an inflection point as investors likely extended the duration of their portfolios by purchasing the new 7 year issue.

The new 7 year issue has been very active in the secondary market where the yield has trended lower since inception. We did, however, experience an uptick last October which may have been spurred by a reopening of the issue that was largely unexpected by investors.

Figure 4:

Short Term Yields Yield: Panama 5% 2018

Sources: MMG Bank

3.00%

3.50%

4.00%

4.50%

Jun-

11

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1

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-11

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-11

0.00%

0.50%

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6 Month Yield 1 Yr Yield

Year Issued Issuer Maturity Amt. Issued Yield Range Price Range

2010 Republica de Panama 5/30/13 466,245,000 3.5% to 4.68% 108.90 to 101.90 2011 Republica de Panama 6/15/18 537,970,000 2.51% to 3.50% 102.44 to 100

Yields on government debt continue to trend

lower

$267 million in volume in the six months since

inception of market maker program

323


505

1,133 207

117

1,099

1,579

0

400

800

1,200

1,600

2010 2011

Commercial Paper (VCNs) Bonds Pfds/Perpetual

Corporate debt issuance reached record levels during 2011. Though the increase was driven primarily by the $395 million ENA Sur Trust issues, overall issuance excluding ENA Sur Trust was strong as most companies have been very successful in refinancing maturing issues into longer terms and lower rates. In the commercial paper segment total issuance decreased over the year. Though we expect companies to continue to extend duration likely lowering total issuance of commercial paper, an analysis of trends in this segment would require further insight into the funding needs of the financial sector, which has constituted more than 70% of issuance. Going forward we expect medium term bond issuance to continue to grow even absent the expected placement of the ENA Norte issue with an estimated size of $650 million.

CORPORATE DEBT MARKET Market Commentary

Figure 5:

35%

46%

19%

2010

21%

72%

7% 2011

Corporate bond issuance more than doubled to

$1,133 million

Corporate Debt Issuance in $ Millions

Issuer Information Figure 6:

Total Debt Issuance 2011

ENA Sur Trust 395

Banco Internacional de Costa Rica 182

Global Bank 137

Banco La Hipotecaria 65

Petroleos Delta 65

Real Estate Investment Thrust 60

Cochez y Compañia 57

Ideal Living 45

Empresas Melo 41

Corp. Andina de Fomento 40

HSBC Leasing 37

Sociedad Urbanizadora del Caribe 36

Generadora Pedregalito 35

Multibank 35

Emp. de Dist. Electrica Metro-Este 30

Inmobiliiaria Don Antonio, 29

BBVA Panama 25

Finanzas Generales 20

Banesco 20

2011 2010

# of Issuers 45 38

# of Issues 223 236

Avg. Size* $5,359,686 $4,658,293

Maturity Distribution

17%

22%

18%

7%

35%

7%

45%

20%

6%

22%

>15 Yr

7 - 14 Yr

4 - 6 Yr

2 - 3 Yr

< 1 Yr

2011 2010

Figure 7:

Companies have been successful refinancing into longer terms and lower interest rates

*Excludes ENA Sur

(In $ Millions)

MMG BANK

388 330

Page 4 January 20, 2012




0% 50% 100%

Communications Diversified

Technology Basic Materials

Utilities Cons. Non-Cyclical

Energy Real Estate

Consumer Cyclical Infrastructure

Financial

2011 2010

Though participation from the financial sector decreased to 44% from 64% in 2010, excluding ENA Sur Trust the financial sector continued to account for more than 60% of all issuance. The market share of the consumer cyclical sector remained relatively stable due to the recurring nature of some of the sector’s predominant issuers such as Cochez y Compañia, Empresas Melo, and Sociedad Urbanizadora del Caribe. In other sectors issuance has been more volatile given the overall lack of non-financial issuers in the market. Since 2010, there have been a total of 50 corporate issuers from which only 25 have been non-financial.


Figure 8: Distribution by Sector

(In Millions)

Financial sector leads issuance activity

In both the commercial paper and perpetual bond segments, the financial and consumer cyclical sectors have accounted for more than 80% of all issuance. Though the bond market has been more diversified than both the commercial paper and perpetual bond markets, investment options outside of the financial sector have been limited by the lack of issuers. Furthermore, many non-financial issues have been fully subscribed by the lead manager of the deal and have remained on the bank’s balance sheet, never having been re-offered to the investment public. In 2011, excluding the ENA Sur Trust issues, there were 12 non-financial issues larger than $10 million in size which combined to total $252 million. We estimate that only $122 million of that total was actively marketed, offered, or re-offered to the investment public.

2011 2010

Financial 700 700

Infrastructure 395 -

Consumer Cyclical 149 138

Real Estate 135 46

Energy 108 15

Cons. Non-Cyclical 51 61

Utilities 30 20

Basic Materials 12 -

Communications - 100

Diversified - 20

Technology 0 -

Total 1,579 1,099

Sector Issuance


Real Estate 1%

Energy 1%

Consumer Non-Cyclical

2%

Utilities 9%

Consumer Cyclical 16%

Financial 71%

2011

Real Estate 1%

Energy 3%


1% Utilities

5%


Financial 74%

2010

Other 5%

Real Estate 8%


11%


Communications 20%

Financial 41%

2010

Sector Distribution by Issue Type

Bonds

Financial 99%

2010


Financial 69%

2011

Pfds/Perpetual Bonds


Figure 9:

Commercial Paper (VCNS)

Others 5%


Energy 9%

Real Estate 12%

Financial 34%

Infrastructure 35%

2011


Lack of rated issuers presents a challenge for institutional investors

Credit Ratings

Commercial Paper (VCNs):

Bond Issues (excluding ENA Sur Trust Issuance):


Figure 10: Segmentation of Issues by Rating

For this segment of our analysis we used the domestic issuer rating assigned by one of the two local credit rating agencies, Fitch Central America or Equilibrium, as a proxy for the investable universe of rated debt. Furthermore, we excluded the ENA Sur Trust issues in order to more accurately reflect the recurring universe of corporate debt issuers. After employing the previous assumptions, we find that financial sector issuance has accounted for the vast majority of total rated issuance. The results are not surprising given that local regulations require banks to obtain a credit rating while the securities commission does not require public debt issues or issuers to obtain a credit rating.

In the commercial paper market, the universe of rated debt has remained relatively stable registering 74% of total issuance in 2011 versus 72% in 2010. Excluding the financial sector, however, short term issuance by rated institutions is marginal accounting for only $43 million in 2011, a slight increase from $33 million in 2010.

In the bond market, total rated issuance has accounted for 38% of total corporate debt placed since 2010. The preponderance of the financial sector also holds for this segment of the market where we find only two non-financial, rated issuers, Empresas Melo and Inmobiliaria Don Antonio, which have combined for only 7% of total issuance since 2010. The lack of rated issuers presents a challenge for institutional investors such as insurance companies and pension funds whose investment policies limit investments in unrated debt. Consequently, we would expect the rated universe of issuers to grow as companies take advantage of excess liquidity and pent-up demand from this investor base.

2010 2011 TOTAL

Total # of Issues 55 127 182 # of rated issues 19 64 83

% of rated issues 35% 50% 46%

Total $ Amount Issued (in millions) 505 738 1,242 $ issued by a rated issuer 147 328 475

% issued by a rated issuer 29% 44% 38%

$ issued by a non-financial, rated issuer 23 65 88

% Issued by a non-financial, rated issuer 5% 9% 7%

2010 2011 TOTAL

Total # of Issues 176 103 279 # of issues by a rated issuer 82 62 144

% issues by a rated issuer 47% 60% 52%

Total $ Amount Issued (in millions) 388 330 718 $ issued by a rated issuer 277 246 523

% issued by a rated issuer 72% 74% 73%

$ issued by a non-financial, rated issuer 33 43 76

% Issued by a non-financial, rated issuer 9% 13% 11%


2.00%

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*Excludes consumer finance companies

3.00%

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Yield Trends


In observing yield trends among issuers we limit our analysis to the 1 year and 5 year maturity segments where the majority of fixed rate corporate debt issuance occurs. Beyond the 5 year segment several issuers have been successful issuing longer maturity debt including 10 year issues. These issues typically include features such amortization, step-up coupons, or floating-rate coupons with floors that make a comparative yield analysis un-insightful given the small universe of longer term issues.

In the commercial paper market (VCNs) corporate issuers have been very successful refinancing issues into lower rates and have driven yields lower throughout most of 2010 and 2011. Yields fell sharply during 2010 but have remained near their lows of 3% throughout 2011. A few issuers including Empresas Melo, Global Bank, and Sociedad Urbanizadora del Caribe were able to issue 1 year commercial paper at yields in the range of 2.75% to 2.90%, levels where we experienced reduced appetite from many of our clients. Going forward we expect 1 year yields to remain near their low range of 3% and view minimal risk of a rise in short term yields.

In the 5 year maturity segment the decrease in rates has been more gradual with higher dispersion in issuer yields. Among recurring issuers Banco Internacional de Costa Rica, BBVA Panama, Banco La Hipotecaria, and Empresas Melo were all able to place 5 year debt at yields below 5%. Consumer finance companies and lower tier banks were also able to reduce their rate on 5 year issues, though at the higher range of 6% to 8%.

*4.5 to 5.5 yr, non-amortizing, fixed rate, issues

1 Yr Issue Yield

5 Yr Issue Yield

Historical Issue Yields Figure 11:

1 year yields have remained near their lows

of 3%


Corporate Debt

The top four placement agents and underwriters of securities have accounted for more than 80% of all corporate debt issued in the primary market since 2010. For the year 2011 MMG Bank doubled its volume to lead the league table with $371 million in debt placements. HSBC Securities and Global Valores also posted a very strong year increasing their market share through their participation as lead managers in the largest issue of the year (ENA Sur). Banco General fell in both its market share and volume versus 2010 though would have registered second place after excluding the ENA Sur Trust bonds.

LEAGUE TABLES

Corporate Debt Primary Market Volume Figure 12:


By analyzing the counterparties involved in primary market transactions we obtained data on total volumes sold to other seats on the exchange, which either purchased the issues for their own books or acted as agents for their clients. We find that 35% of all corporate debt issued in 2011 was sold to other seats, a slight increase from 34% in 2010. Though we understand that this metric does not represent a complete measure of the degree to which issues are offered and actively marketed throughout the country, we do believe it holds some correlation and would view a further increase as a favorable indicator of improved market integration and cooperation.

(In $ Millions)

Debt Placements with other Seats on Exchange Figure 13:

(In $ Millions)

Sources: BVP, MMG Bank * Includes other seats not listed

2011 2010

Underwriter/Agent Total Volume

Sold to Other Seat % Total

Volume Sold to

Other Seat %

MMG Bank 371 197 53% 183 130 71%

Global Valores 305 161 53% 161 72 44%

HSBC Securities 352 61 17% 83 22 27%

BG Valores/BG Investment 283 47 16% 432 67 15%

Multi Securities 59 34 57% 64 40 62%

Prival Securities 139 32 23% 38 7 19%

Tower Securities 21 20 95% 8 3 32%

Lafise Valores 11 3 30% 26 3 10%

CitiValores 14 2 14%

Total* 1,579 558 35% 1,099 365 34%

2011 2010 Underwriter/Agent Volume Mkt Share Rank Volume Mkt Share Rank

MMG Bank 371 23% 1 183 17% 2 HSBC Securities 352 22% 2 83 8% 4 Global Valores 305 19% 3 161 15% 3 BG Valores/ BG Investment 283 18% 4 432 39% 1 Prival Securities 139 9% 5 38 3% 7 Multi Securities 59 4% 6 64 6% 6 Tower Securities 21 1% 7 8 1% 10 Geneva Asset Management 18 1% 8 29 3% 8 CitiValores 14 1% 9 Other Seats 17 1% 101 9% Total 1,579 100% 1,099 100%

Top four placement agents account for

more than 80% of all corporate debt issuance


Government Debt

LEAGUE TABLES

Government Debt Primary Market Volume Figure 14:

(In $ Millions)

2011 2010 Placement Agent Bought Sold Total % Bought Sold Total %

MMG Bank 145 136 280 41% 20 20 40 75%

CitiValores 84 63 147 22%

Multi Securities 23 52 75 11%

HSBC Securities 44 21 65 10%

Geneva Asset Management 14 27 40 6%

Banco Nacional de Panama 5 16 21 3% 0 0 0 1%

BG Valores/BG Investment 9 6 16 2% 4 4 7 13%

Lafise Valores 3 9 12 2%

Interbolsa 1 7 7 1%

Bridge Capital 5 1 7 1%

Prival Securities 1 5 6 1% 3 3 6 11%

Credicorp Securities 6 6 1%

SFC Investment 3 3 0%

Total* 342 342 685 100% 27 27 53 100%

Government Debt Secondary Market Volume Figure 15:

(In $ Millions)

2011 2010 Placement Agent Volume Mkt Share Rank Volume Mkt Share Rank

CitiValores 317 37% 1 169 20% 2

HSBC Securities 196 23% 2 310 36% 1

MMG Bank Corporation 131 15% 3 71 8% 4

Geneva Asset Management 70 8% 4 12 1% 7

Prival Securities 40 5% 5 45 5% 6

Multi Securities 37 4% 6 - 0%

Banco Nacional de Panama 30 3% 7 152 18% 3

BG Valores/BG Investment 19 2% 8 68 8% 5

Interbolsa 10 1% 9

Others Agents 11 1% 27 3% Total 861 100% 853 100%

In the government debt primary market CitiValores (Citibank Panama), HSBC Securities, and MMG Bank lead the table with a combined market share of 75% and total placements of $644 million for 2011. More importantly, with the creation of the market maker program for government debt, a secondary market has finally been created. Volume in the secondary market increased significantly from $27 million in 2010 to $342 million in 2011. Moreover, the majority of the volume traded occurred in the newly issued 2018 bond making volume heavily skewed towards the latter half of the year. Consequently, we would expect total volume to be higher on an annualized basis.

Evidently the creation of the market maker program has been an important first step in increasing liquidity for government debt. This program combined with increased issuance of longer duration bonds should continue to significantly increase secondary market volume and the overall liquidity of the government debt market.

Market maker program successfully increased trading in secondary

markets

MMG BANK *Includes all government debt traded including bills (Letras del Tesoro)

January 20, 2012



2011 Debt Issuance by Rated Issuers (in millions):

2010 Debt Issuance by Rated Issuers (in millions):

OTHER CHARTS

Issuer Sector Com. Paper Bonds Total $

Issued Local Issuer

Rating Int.

Rating

ENA Sur Trust Infrastructure 0 395 395 AAA BBB Banco Internacional de Costa Rica Financial 97 86 182 AA- BB+ Global Bank Financial 72 32 104 A Banco La Hipotecaria Financial 31 28 60 A Empresas Melo Consumer Cyclical 13 29 41 A+ Corporacion Andina de Fomento Financial 0 40 40 A+ Emp. de Distribucion Electrica Metro-Este Utilities 30 0 30 AA+ Inmobiliaria Don Antonio Consumer Non-Cyc. 0 29 29 AA BBVA Panama Financial 0 25 25 AAA BBB- Multibank Financial 0 20 20 A+ BB Central American Bank for Economic Int. Financial 0 14 14 A- Banco Delta Financial 3 9 13 BB Banco Aliado Financial 0 8 8 A Saltos de Francoli Energy 0 8 8 BBB- Capital Bank Financial 0 2 2 BBB

Issuer Sector Com. Paper Bonds Total $

Issued Local Issuer

Rating Int.

Rating

Global Bank Financial 83 10 93 A Banco Internacional de Costa Rica Financial 89 0 89 AA- BB+ Banco Nacional de Panama Financial 0 75 75 AA+ BBB Banco La Hipotecaria Financial 68 0 66 A Empresas Melo Consumer Cyclical 13 20 33 A+ Multibank Financial 0 29 29 A+ BB Emp. de Distribucion Electrica Metro-Este Utilities 20 0 20 AA+ Banco Delta Financial 5 6 10 BB Saltos de Francoli Energy 0 3 3 BBB- Banco Aliado Financial 0 3 3 A

MMG BANK Page 11 January 20, 2012




OTHER CHARTS

2011 Bond Issuers:

Issuer Total $ Issued ENA Sur Trust 395,000,000 Banco Internacional de Costa Rica 85,500,000 Petroleos Delta 60,000,000 Real Estate Investment Thrust 60,000,000 Ideal Living 45,000,000 Corp. Andina de Fomento 40,000,000 HSBC Leasing 37,000,000 Generadora Pedregalito 35,000,000 Global Bank 32,000,000 Empresas Melo 28,680,000 Inmobiliaria Don Antonio 28,500,000 Banco La Hipotecaria 28,373,000 BBVA Panama 25,150,000 Finanzas Generales 20,000,000 Multibank 19,509,000 Metro Leasing 18,000,000 Cochez y Compañia 16,042,000 Almacenaje Seco y Frio 16,000,000 Sociedad Urbanizadora del Caribe 15,994,000 Aliado Leasing 15,500,000 Aliado Factoring 15,000,000 Banco Centroamericano de Int. Econ. 14,000,000 Bahia las Minas 11,955,000 Los Castillos Real Estate 10,500,000 Banco Delta 9,488,000 Banco Aliado 8,000,000 Promotora Torre Aseguradora Ancon 7,943,043 Saltos de Francoli 7,579,000 Desarrollo Inmobiliario del Este 7,500,000 Hipotecaria Metrocredit 4,990,000 Corp. Finanzas del Pais 4,910,000 Finanzas y Creditos del Hogar 2,669,000 Multi Financiamientos 2,000,000 Capital Bank 1,505,000 Colfinanzas 1,432,000 First Factoring 1,001,000 R.G. Inmobiliaria 634,000 Smart Solutions Marketing Panama 412,000 Total 1,132,766,043

Issuer Total $ Issued Cable Onda 100,000,000 Banco Nacional de Panama 75,000,000 Comp. Azucarera la Estrella 50,000,000 Desarrollo Inmobiliario del Este 32,500,000 Multibank 29,228,000 HSBC Leasing 23,800,000 Empresas Melo 20,000,000 MHC Holding 20,000,000 Tropical Resorts International 20,000,000 Franquicias Panameñas 17,000,000 Finanziera Cash Solution 16,241,000 Cochez y Compañia 12,013,000 First Factoring 11,804,000 Global Bank 10,000,000 Indesa Capital 9,234,000 Colfinanzas 8,568,000 Promotora Torre Aseguradora Ancón 8,063,000 Sociedad Urbanizadora del Caribe 7,111,000 Aliado Factoring 6,000,000 Banco Delta 5,624,000 Empresas Tagaropulos 5,000,000 Corp. Finanzas del Pais 3,500,000 Saltos de Francoli 3,371,000 Banco Aliado 3,347,000 Aliado Leasing 3,000,000 Hipotecaria Metrocredit 2,957,000 R.G. Inmobiliaria 1,333,000 Total 504,694,000

2010 Bond Issuers:





OTHER CHARTS

2011 Commercial Paper (VCNs) Issuers: 2010 Commercial Paper (VCNs) Issuers:

Issuer Total $ Issued Banco Internacional de Costa Rica 96,686,000 Global Bank 71,828,000 Banco La Hipotecaria 31,310,000 Emp. de Dist. Electrica Metro-Este 30,000,000 Sociedad Urbanizadora del Caribe 20,252,000 Panameña de Motores 15,000,000 Hipotecaria Metrocredit 14,000,000 Empresas Melo 12,643,000 Empresas Tagaropulos 6,000,000 Cochez y Compañia 5,000,000 Corp. Finanzas del Pais 5,000,000 Helefactor 5,000,000 Petroleos Delta 5,000,000 Finanzas y Creditos del Hogar 4,000,000 Banco Delta 3,216,000 R.G. Inmobiliaria 3,000,000 First Factoring 2,076,000 Total 330,011,000

Issuer Total $ Issued

Banco Internacional de Costa Rica 88,859,000

Global Bank 83,004,000

Banco La Hipotecaria 67,531,000

Sociedad Urbanizadora del Caribe 23740000

Econo-Finanzas 20,751,000

Emp. de Dist. Electrica Metro-Este 20,000,000

Panameña de Motores 20,000,000

Empresas Melo 13,000,000

Petroleos Delta 10,000,000

Hipotecaria Metrocredit 9,000,000

Empresas Tagaropulos 6,000,000

Cochez y Compañia 5,000,000

Corp. Finanzas del Pais 5,000,000

Banco Delta 4,811,000

Finanzas y Creditos del Hogar 4,000,000

R.G. Inmobiliaria 3959000

Helefactor 3,000,000

Total 387,655,000


Cochez y Compañia 35,720,000


Banesco 20,000,000

Multibank 15,027,500

Banco La Hipotecaria 5,374,000

Corp. Finanzas del Pais 5,000,000

Credicorp Bank 1,606,000

Grupo Banco Delta 964,000

Banco General 250,000

Odin Energy 15,000

Total 116,713,500


Banco General 118,839,000


Banco Aliado 20,000,000

Towerbank 5,000,000

Multibank 3,759,300

Odin Energy 1,152,867

Grupo Banco Delta 659,000

Credicorp Bank 326000

Total 206,999,167

Pfd/Perpetual Bond Issuers for 2011: Pfd/Perpetual Bond Issuers for 2011:







OTHER CHARTS

2011 Bond Issues (=>10 million in size):

ISIN Issuer Industry Coupon Maturity Total $ Issued USP3716WAB74 ENA Sur Trust Infrastructure 5.25% 5/25/25 225,000,000 USP3716WAA91 ENA Sur Trust Infrastructure 5.75% 5/25/25 170,000,000 PAL0600221A9 Real Estate Investment Thrust Real Estate 6.50% 4/30/18 45,000,000 PAL0736322A2 Ideal Living Real Estate 6.50% 2/10/14 45,000,000 XS0623817797 Corp. Andina de Fomento Financial 3.63% 5/11/16 40,000,000 PAL3600321A1 Generadora Pedregalito Energy 7.00% 6/30/18 35,000,000 PAL3904926B8 Petroleos Delta Energy 5.00% 5/9/21 35,000,000 PAL3104131B3 BBVA Panama Financial 3.75% 5/31/16 20,000,000 PAL3108113A9 Finanzas Generales Financial 5.75% 11/20/14 20,000,000 PAL312371DD6 Global Bank Financial 5.25% 2/7/18 17,500,000 PAL0600221B7 Real Estate Investment Thrust Real Estate 12.00% 4/30/23 15,000,000 PAL3904926A0 Petroleos Delta Energy 4.75% 5/9/18 15,000,000 PAL312371DE4 Global Bank Financial 5.25% 2/23/18 14,500,000 PAL3001011A3 Metro Leasing Financial 6.00% 8/16/21 14,000,000 XS0669881715 Banco Centroamericano de Int. Econ. Financial 2.00% 8/29/21 14,000,000 PAL3003711F5 Aliado Leasing Financial 8.50% 11/9/16 13,000,000 PAL1800721A4 Almacenaje Seco y Frio Consumer Non-Cyclical 6.75% 11/30/18 11,500,000 PAL3003812F1 Aliado Factoring Financial 8.50% 12/28/16 11,000,000 PAL0848222A9 Los Castillos Real Estate Real Estate 4.25% 12/22/26 10,500,000 PAL352071AC1 Multibank Financial 5.88% 8/24/15 10,052,000 PAL0756821E0 Inmobiliaria Don Antonio Consumer Non-Cyclical 3.75% 9/12/16 10,000,000 PAL1245026H6 Empresas Melo Consumer Cyclical 5.00% 10/17/17 10,000,000 PAL1245026I4 Empresas Melo Consumer Cyclical 5.50% 10/17/18 10,000,000 PAL3048211G1 HSBC Leasing Financial 2.61% 9/2/16 10,000,000 PAL3904926C6 Petroleos Delta Energy 6.50% 5/9/23 10,000,000




OTHER CHARTS

2011 Commercial Paper (VCNS, =>5 million in size):

ISIN Issuer Industry Coupon Maturity Total $ Issued PAL2814431B0 Emp. de Dist. Electrica Metro-Este Utilities 2.90% 5/6/12 30,000,000 PAL3520633J7 Banco Internacional de Costa Rica Financial 3.00% 9/20/12 14,985,000 PAL3520633Q2 Banco Internacional de Costa Rica Financial 3.25% 12/17/12 14,985,000 PAL3520633L3 Banco Internacional de Costa Rica Financial 3.00% 10/18/12 13,152,000 PAL157732AA9 Hipotecaria Metrocredit Financial 7.00% 6/19/12 10,000,000 PAL312373FM8 Global Bank Financial 3.00% 6/21/12 10,000,000 PAL312373FO4 Global Bank Financial 3.00% 8/13/12 10,000,000 PAL312373FN6 Global Bank Financial 3.00% 7/5/12 9,991,000 PAL312373FP1 Global Bank Financial 3.00% 9/6/12 9,951,000 PAL312373FK2 Global Bank Financial 2.75% 3/8/12 9,950,000 PAL312373FQ9 Global Bank Financial 3.00% 11/15/12 9,459,000 PAL3520633R0 Banco Internacional de Costa Rica Financial 3.25% 12/20/12 9,027,000 PAL3520633P4 Banco Internacional de Costa Rica Financial 3.00% 9/7/12 8,000,000 PAL312373FL0 Global Bank Financial 2.75% 3/31/12 5,042,000 PAL0022134B2 Cochez y Compañia Consumer Cyclical 3.00% 4/4/12 5,000,000 PAL0302933D4 Panameña de Motores Consumer Cyclical 3.00% 6/1/12 5,000,000 PAL0302933E2 Panameña de Motores Consumer Cyclical 3.00% 6/8/12 5,000,000 PAL0302933F9 Panameña de Motores Consumer Cyclical 3.00% 8/17/12 5,000,000 PAL312373FR7 Global Bank Financial 3.00% 12/9/12 5,000,000 PAL3151132A5 Helefactor Financial 5.00% 10/4/12 5,000,000 PAL3520633F5 Banco Internacional de Costa Rica Financial 3.13% 1/10/12 5,000,000 PAL3520633G3 Banco Internacional de Costa Rica Financial 3.13% 1/17/12 5,000,000 PAL3520633H1 Banco Internacional de Costa Rica Financial 3.13% 2/3/12 5,000,000 PAL3904925A2 Petroleos Delta Energy 3.50% 5/7/12 5,000,000




IMPORTANT DISCLOSURES

MMG BANK

The material provided in this presentation is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy securities related to any of the products or services mentioned herein. This presentation does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is unauthorized; or to any person to whom it would be illegal to make such an offer or solicitation. It is the responsibility of the person(s) in possession of this material to verify the information and applicable laws and regulations of any relevant jurisdiction. Potential investors should verify the information and take the appropriate measures regarding legal requirements and tax and exchange control laws and regulations in their country of nationality, residence or domicile that might be relevant to the subscription, purchase, possession, exchange, amortization or disposition of any investment. Past results are not indicative of future results; the value of investments and capital derived from these investments may fluctuate. Prospective yields are not guaranteed and a loss of principal may occur. This material contains current opinions of the author but not necessarily those of MMG Bank Corporation and such opinions are subject to change without notice. The opinions expressed herein are given on the date this material is presented. This material may not be 1) copied, photocopied or duplicated in any way or by any means; or 2)redistributed without the written consent of MMG Bank Corporation. This presentation may include forward-looking statements that reflect the intentions, beliefs or expectations of the company. Forward-looking statements are subject to risk, uncertainty, assumptions and other factors that could lead to material differences between related markets and forward-look statements expressed or suggested herein.

Page 16 January 20, 2012 A Primer on Panama’s Debt Capital Markets

a primer on panama's debt capital markets

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