The Republic of Honduras 7.50% Notes Due 2024
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OFFERING CIRCULAR U.S.$500,000,000 The Republic of Honduras 7.50% Notes due 2024 The Republic of Honduras (the "Republic") is offering U. S. $500,000,000 aggregate principal amount of its 7.50% Notes due 2024 (the "Notes"). Interest on the Notes will be payable semi-annually in arrears on March 15 and September 15 of each year commencing on September 15, 2013. The Notes will mature on March 15, 2024. Principal will be repaid in three nominally equal installments on March 15, 2022, March 15, 2023 and at maturity. The Notes will contain provisions, commonly known as "collective action clauses", regarding acceleration and voting on future amendments, modifications and waivers. Under these provisions, which are described in the sections entitled "Terms and Conditions of the Notes -- Events of Default" and "-- Collective Action Securities, Modifications, Amendments and Waivers", the Republic may amend (i) the payment provisions of the Notes and certain other terms with the consent of the holders of 75% of the aggregate amount of the outstanding Notes or (ii) the payment provisions of multiple series of debt securities issued under the Fiscal Agency Agreement with the consent of (a) the holders of 75% of the aggregate principal amount outstanding of all affected series and (b) holders of 66 2/3% of the aggregate principal amount outstanding of each affected series. Except as described herein, payments on the Notes will be made without deduction for or on account of withholding taxes imposed by the Republic. Application has been made to list the Notes on the Official List of the Luxembourg Stock Exchange and to have the Notes admitted to trading on the Euro MTF Market. This Offering Circular constitutes a prospectus for the purpose of the Luxembourg Law dated July 10, 2005 on prospectuses for securities, as amended. Investment in the Notes involves Risk. See "Risk Factors" beginning on page 8 regarding certain risk factors you should consider before investing in the Notes. Issue price: 100.00% plus accrued interest, if any, from March 15, 2013 The Notes have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"). The Notes may not be offered or sold within the United States or to U.S. persons except to qualified institutional buyers (each a "qualified institutional buyer") in reliance on the exemption from registration provided by Rule 144A ("Rule 144A") under the Securities Act and to certain persons in offshore transactions in reliance on Regulation S ("Regulation S") under the Securities Act. You are hereby notified that sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A under Securities Act. Delivery of the Notes in book-entry form will be made on or about March 15, 2013 through a common depositary for Euroclear Bank S.A./N.V., or Euroclear, and Clearstream Banking, sociOtO anonyme, Luxembourg, or Clearstream. Sole Book-Running Manager Deutsche Bank Securities The date of this Offering Circular is March 12, 2013 Honduras BELIZE GUATEMALA Gracias a Dio: N I CARAG UA IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE REPUBLIC AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS INVOLVED. You should rely only on the information contained in this document or to which we have referred you. We have not, and the Sole Book-Running Manager have not, authorized anyone to provide you with information that is different from the information contained in this document. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document. This Offering Circular may only be used for the purposes for which it has been published. TABLE OF CONTENTS Def’med Terms and Conventions .................................................................................................................................................iv Presentation of Financial and Economic Information ..............................................................................................................iv Forward-Looking Statements .....................................................................................................................................................iv Enforcement of Civil Liabilities ..................................................................................................................................................vi Exchange Rate Information .......................................................................................................................................................vii Summary ........................................................................................................................................................................................1 The Offering ..................................................................................................................................................................................6 Risk Factors ...................................................................................................................................................................................8 Use of Proceeds ............................................................................................................................................................................12 The Republic of Honduras .........................................................................................................................................................13 The Honduran Economy ............................................................................................................................................................18 Foreign Trade and Balance of Payments ..................................................................................................................................46 Monetary System .........................................................................................................................................................................66 Public Sector Finances ................................................................................................................................................................78 Public Sector Debt .......................................................................................................................................................................90 Terms and Conditions of the Notes ...........................................................................................................................................96 Plan of Distribution ...................................................................................................................................................................107 Book-Entry Settlement and Clearance ....................................................................................................................................111 Transfer Restrictions ................................................................................................................................................................115 Taxation .....................................................................................................................................................................................117 Validity of the Notes ..................................................................................................................................................................120 General Information .................................................................................................................................................................121 The Notes will be direct, general unsubordinated, unsecured and unconditional obligations of the Republic. The Notes will, at all times, rank pari passu, without any preference among themselves, with all other unsecured and unsubordinated obligations of the Republic, present or future, constituting Public External Indebtedness (as defined herein) of the Republic. The Notes will be issued in registered form only. Notes sold in offshore transactions in reliance on Regulation S will be represented by one or more permanent global notes in fully registered form without interest coupons (the ~Regulation S Global Note") deposited on behalf of the Sole Book-Running Manager for the Notes represented thereby with The Bank of New Mellon, London Branch, or the %ommon depositary", and registered in the name of The Bank of New York Depository (Nominees) Limited, or the ~nominee", of the common depositary for the account of Euroclear or Clearstream. Notes sold in the United States to qualified institutional buyers as defined in, and in reliance on, Rule 144A will be represented by one or more permanent global notes in fully registered form without interest coupons (the ~Rule 144A Global Note" and, together with the Regulation S Global Note, the ~Global Notes") deposited on behalf of the Sole Book-Running Manager for the Notes represented thereby with common depositary and registered in the name of nominee of the common depositary for the account of Euroclear or Clearstream. Except as described herein, definitive Notes will not be issued in exchange for beneficial interests in the Global Notes. See ~Terms and Conditions of the Notes-- Form, Denomination and Title". For restrictions on transfer