Uruguay plans to issue UI, DPN bonds

By Reshmi Basu

New York, June 20 - The Oriental Republic of Uruguay is expected to issue a two-tranche bond offering of Unidades Indexadas (UI) bonds due August 2007 and devaluation-protected notes (DPN) due February 2006, according to market sources.

The UI bonds will be structured as a three-year bullet. The principal will be adjusted for Uruguayan inflation on each payment date. Payments will be in U.S. dollars based on the Uruguayan peso/dollar exchange rate at the time of each payment.

The coupon for the DPN notes will be the greater of a fixed rate and the devaluation rate in the interest period. The devaluation rate will be the average exchange rate for each interest period compared to the average for the previous period.

Principal will be paid in two equal semiannual installments on August 2005 and on the maturity date. Principal and interest payments will be made in U.S. dollars.

The size of both tranches is to be determined.

Citibank and ABN Amro are running the deal. The securities are being offered in the United States under Uruguay's shelf registration.

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