Colombia's Aval To Sell Up To COP750B In Local Bonds Thursday

BOGOTA (Dow Jones)--Colombia's largest banking group, Grupo Aval y Valores SA (GRUPOAVAL.BO), which controls four banks and a pension fund among others, plans to sell as much as 750 billion Colombian pesos ($376 million) Thursday to repay existing, expensive debt and take advantage of better market conditions.

The company will offer COP600 billion of new bonds, with the possibility to expand the offer to COP750 billion if demand justifies it, the company said in an ad published in the local newspaper La Republica.

The new bonds will carry maturities of between 3 years and 15 years, with floating rates tied to inflation and to the benchmark DTF rate, which is the weighted average of the rates Colombian banks pay on 90-day certificates of deposit.

Guillermo Rosas, the chief executive of Aval's brokerage unit Casa de Bolsa, said two weeks ago the group is taking advantage of lower interest rates to replace outstanding expensive debt.

Rates are currently lower in Colombia as a result of the expansive monetary policy led by the country's Central Bank. Local pension funds and institutional investors are awash with cash and looking for investment opportunities.

In 2005, Grupo Aval sold five-year bonds paying a spread of 5.03 percentage points over the inflation rate, Rosas said, and it will pay no more than inflation plus a spread of 4.50% this time, the company said in the ad in La Republica.

On top of that, inflation currently stands at historic lows.

Other local companies, such as Grupo de Inversiones Suramericana SA (GRUPOSURA.BO), sold COP250 billion in local bonds last week.

Aval controls four banks in Colombia--Banco de Bogota SA (BOGOTA.BO), Banco Popular SA (POPULAR.BO), Banco de Occidente SA (OCCIDENTE.BO) and Banco AV Villas (VILLAS.BO)--as well as holding company Corficolombiana SA (CORFICOL.BO) and pension fund Porvenir.

The group's banks account for 28.9% of the Colombian total banking industry's loans.

-By Inti Landauro, Dow Jones Newswires; 57-1-610 70 44 Ext. 1131; colombia@dowjones.com

Source: wsj,com/