Panama speeding up bond risk rating

NEW REGULATIONS governing Panama bond issues have been in the pipeline for over a year  but  the backdated bankruptcy  of R. G. Hotels  and  a $30 million bond issue in danger have  created a new sense of urgency. 

The Superintendency of Securities is working on a regulation to require bonds issued on the local market to  carry arisk rating.

A recent court ruling, which declared the Hotel company’s  bankruptcy to be retroactive to prior to the 2012 bond issue, has prompted strong calls for reforms to protect investors, who appear to be left with nothing due to the court decision.

Superintendency official Marelissa Quintero said that most well-regulated markets require risk ratings for bond issues and other financial transactions. For example, regulations in Costa Rica require two such ratings.

The Superintendency Board of Directors must approve the changes, which also have to go through a period of public consultation. Quintero predicts that “there will be sectors that do not agree” with the changes, and their concerns must be addressed reports La Prensa.

She noted that banks are required to have a rating, a change that also generated controversy when it was imposed.

She stressed that it is important that the investor has the necessary information to make the right decision.

With a risk rating, “we will have documents that examine the product that is being acquired, and allows the investor to better understand the risk,” Quintero said.

“With this measure, the regulator aims to increase protection to investors and create a stronger, more transparent market,”