SEC Division of Trading and Markets no-action letter: Republic of Uruguay

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

) DIVISION OF
,·RADING AND MARKETS June 24,2008
)

)

Antonia E.. Stolper, Esq.
Sheannan & Sterling LLP
599 Lexington Avenue.
New York, New York 10022
Re:. The. Republic of Uruguay ("Uruguay")

File. No.: TP 08-56

Dear Ms.. Stolper:
In your letter dated June 24, 2008, as. supplemented by conversations with the staff, you request on behalf ofCitigroup Global Markets, Inc. (the "Dealer Manager") and certain ofits. affiliates,. an exemption from Rule 101 ofRegulation M in connection with Uruguay's. Exchange Offer with respect to several series. ofits existing bonds (the "Existing Bonds"),. in which Uruguay may exchange Existing Bonds for an unlimited amount ofreopened 2036. Bonds. (the "Reopened Bonds"). The Reopened Bonds will have the same temis. and conditions as, and will be. consolidated and fungible with, Uruguay's outstanding U.S. $1,277 million in principal amount of7.625% Bonds due
2036. (the "Outstanding Bonds"), which are payable by their terms in U.S. dollars (the .
Outstanding Bonds,. together with the contemplated Reopened Bonds, the "Bonds"). Specifically,. you seek an exemption from Rule 101 ofRegulation M with respect to the trading activities ofthe Dealer Manager and its affiliates relating to the Bonds, while participating in the. distribution ofthe Reopened Bonds.. We have. attached a copy of your letter to. avoid reciting the facts that it presents. Unless otherwise noted, each defined term in this letter has the. same meaning as defined in your letter. Response:
. On the basis of your representations and the facts. presented, but without necessarily concurring in your analysis, the Securities and Exchange Commission ("Commission") hereby grants an exemption from Rule 101 ofRegulation M to permit the Dealer Manager and its affiliates, in connection with their role as market makers, to bid for,. purchase,. and solicit the purchase ofthe Bonds during the applicable restricted period for the distribution ofthe Reopened Bonds. In particular, this. exemption is based on the. facts. that:. Uruguay is a sovereign government whose financial affairs are. widely reported.on; the market for the Bonds is highly liquid and has considerable depth due to the U.S. $1,277,000,000 aggregate principal amount ofthe Outstanding Bonds; the Dealer Manager estimates that at least 20 dealers regularly place bids. and offers. for the Outstanding Bonds, ofwhich at least 10 are continuous market makers; the Dealer

'Antonia E. Stolper, Esq.

Sheannan & Sterling LLP

June 24, 2008

Manager estimates that daily purchases and sales ofthe Outstanding Bonds by the Dealer Manager and its affiliates account for approximately 10% ofthe average daily trading volume ("ADTV") in the Outstanding Bonds, and they do not expect that their daily purchases. and sales ofthe. Bonds. will account for more than 10% ofthe ADTV ofthe Bonds; the. Outstanding Bonds trade. (and after the Exchange Offer, the Bonds are expected to trade) primarily on the. basis of a spread to U.S. Treasury securities with corresponding maturities in a manner similar to trading in investment grade debt securities; at present, Uruguay's aggregated gross public sector external debt is approximately U.S. $8.2 billion in principal amount; the Bonds are payable by their terms in U.S. dollars; the bid and ask prices for the Outstanding Bonds are available on a widely disseminated electronic information service; and the Exchange. Offer will be. made pursuant to Uruguay's effective. shelfregistration statement filed with the Commission under the. Securities Act of 1933. This exemption is subject to the following conditions:

1. The Dealer Manager and its affiliates shall provide to the Division ofTrading
   .-and Markets (the. "Division") upon request, a daily time-sequenced schedule of all transactions. in the. Bonds. made during the period commencing five business days prior to. the. launch ofthe Exchange Offer, and ending when the distribution in the U.S. is completed or abandoned, on a transaction-by ) I / transaction basis, including:
   a. size, broker (if any), time of execution, and price 0 f the. transactions, b, the exchange, quotation system, or other facility through which the transactions. occurred, and
   c. whether the transactions. were made for a customer account or a
   proprietary account.
   The. records required pursuant to this exemption shall be maintained by the Dealer Manager arid its affiliates for at least two years from the. date ofthe termination ofthe. Exchange Offer.
2. The prospectus supplement for the Exchange Offer shall disclose that the
   Dealer Manager and its affiliates have been exempted, consistent with this letter, from the provisions ofRule 101 ofRegulation M. The. foregoing exemption from Rule 101 ofRegulation M is based solely on your representations and the facts. presented, and it is strictly limited to the application ofthis rule to the. proposed transactions. Such transactions should be discontinued, pending presentation ofthe facts for our consideration, if any material change occurs with respect to any ofthose facts or representations. )

Antonia E. Stolper, Esq.
Shearman & Sterling LLP
June 24, 2008
In addition, persons relying on this. exemption are directed to the anti-fraud and anti-manipulation provisions ofthe federal securities laws, including Sections. 9(a} and 10(b} ofthe Securities Exchange Act of 1934 (Exchange Act), and Rule. lOb-5 thereunder. Responsibility for compliance with these and any other provisions ofthe federal or state securities laws must rest withthe Dealer Manager and its affiliates. The Division expresses no view with respect to any other questions that the proposed transactions. may raise,. including, but not limited to, the adequacy of disclosure concerning, and the applicability ofother federal and state laws or Exchange Act rules to,. the. proposed transactions. For the. Commission, by the Division ofTrading and Markets,. pursuant to delegated authority, Josephine ~y~J. Tao Assistant Director Enclosure.

Dr:"('r-/, '-0 SHEARMAN & STERLINGu.l!-vc. Vt
599 LEXINGTON AVENUE I NEW YORK I NY I 2QOO-~~~ 25 Ml 10: 04 ) WWW.SHEARMAN.COMIT +1.212.848.4000 I F +1.212.84f}·H~" ., "c', ...... t J . J [.,.,., Vo:-U,. iji~\ christopher.ross@shearman.com . June 24, 2008 212-848-4110 Via FedEx Liz Sandoe u.s. Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Dear Ms. Sandoe:
Enclosed, please find the original no action request letter on behalf of Citigroup Global Markets, Inc. in connection with its role as dealer manager with respect to the exchange offer by the Republic ofUruguay. I understand that upon receipt of this original letter we should expect to receive an original response letter (I have already received a pdf version from Joan Collopy). Please feel free to contact me with any questions. Regards, ~!b- Christophe} ~s Enclosure cc: Joan Collopy ) ABU DHABI I BEIJING I BRUSSELS I DOSSElOORF I FRANKFURT I HONG KONG I LONDON I MENLO PARK I MUNICH NEW YORK I PARIS I ROME I SAN FRANCISCO I SAO PAULO I SHANGHAI I SINGAPORE I TOKYO I TORONTO I WASHINGTON, DC SHEARMAN & STERUNG UP IS A LIMITED L1ABIUTY PARTNERSHIP ORGANIZED IN THE UNITED STATES UNDER THE LAWS OF THE STATE OF DELAWARE. WHICH LAWS LIMIT THE PERSONAL LIABILITY OF PARTNERS.

SHEARMAN & STERLINGtL;:'
599 LEXINGTON AVENUE I NEW YORK IaWf 10021.5ciJJ ... , '2: 2G / WWW.SHEARMAN.COMIT +1.212.848.4000 I F +1.212,848.7179 christopher.ross@shearman.com June 24, 2008 212-848-4110 Via FedEx Liz Sandoe U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Dear Ms. Sandoe:
\ Enclosed, please find the original no action request letter on behalf of Citigroup Global Markets, Inc. in connection with its role as dealer manager with respect to the exchange offer by the Republic of Uruguay. I understand that upon receipt of this origina11etter we should expect to receive an original response letter (I have already received a pdf version from Joan Collopy). Please feel free to contact me with any questions. • Regards, (f£~ Christophe} ~s Enclosure cc: Joan Collopy ABU DHABI I BEIJING I BRUSSELS I OOSSELDORF I FRANKFURT I HONG KONG I LONOON I MENLO PARK I MUNICH NEW YORK I PARIS I ROME I SAN FRANCISCO I SAO PAULO I SHANGHAI I SINGAPORE I TOKYO I TORONTO I WASHINGTON, DC SHEARMAN & STERUNG UP IS I< w.aTED UA8lUlY PARTNERSHIP ORGANZED·ii~TED STI<TES U~~!P!!E LAWS OF THE STATE OF DELAWARE, WHICH LAWS UMiT THE PERSONf<l UABIUlY OF PARTNERS.

SHEARMAN & STERLINGLLP
599 LEXINGTON AVENUE I NEW YORK I NY I 10022-6069 WWW.SHEARMAN.COMIT +1.212.848.4000 I F +1.212.848.7179 CONFIDENTIAL TREATMENT REQUESTED ~=-=:C-'::.:..'-:':;--':.::::'ast:G:lp~.@sAeatm.all:.-GJ1m ... -..•.--:.:.....=..--=.... ='-...::='=.=-.''-----'--''-=-'-'--'-'-'-'----' (212) 848-5009 Via Email and FedEx Josephine J. Tao

Assistant Director

Division ofTrading and Markets

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Republic ofUiuguay ("Uruguay")

Securities Exchange Act of 1934

Rule 101 ofRegulation M

Dear Ms. Tao:
)
We are writing on behalf ofCitigroup Global Markets, Inc., (the "Dealer Manager,") and certain of its affiliatesl to request an exemption from Rule 101 ("Rule 101") of Regulation M under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect to the trading activities ofthe Dealer Manager and its affiliates in connection with Uruguay's intended exchange offer with respect to several series of its existing bonds (the "Existing Bonds"), in which Uruguay may exchange Existing Bonds for an unlimited amount of reopened 2036 Bonds (the "Reopened Bonds"). The Reopened Bonds will be covered by an effective shelf registration statement and will have the same terms and conditions as, and will be consolidated and fq.ngibfe with, Uruguay's outstanding U.S.$1,277 million in principal amount of7.625% Bonds due 2036 (the "Outstanding Bonds"), which are payable by their terms in U.S. dollars. The Outstanding Bonds and contemplated Reopened Bonds together are 'hereinafter referred to. as the "Bonds." I For purposes ofthis letter, affiliate means any person that directly or indirectly controls, is controlled by, or is under common control with, the Dealer Manager. ) / ABU DHABI I BEIJING I BRUSSELS I DUSSELDORF I FRANKFURT I HONG KONG I' LONDON I MANNHEIM I MENLO PARK MUNICH I NEW YORK I PARIS I ROME I SAN FRANCISCO I SAO PAULO I SINGAPORE I TOKYO I ,TORONTO 1 WASHINGTON, DC . SHEARMAN & STERUNG LlP IS A LIMITED LIABILITY PARTNERSHIP ORGANlZED IN THE UNITED STATES UNDER THE LAWS Of THE STATE OF DELAWARE, WHICH LAWS LIMIT THE PERSONAL LIABILITY Of PARTHERS.

)

1. FACTS
   The Exchange Offer
   The Outstanding Bonds originally were issued on March 21, 2006 in the aggregate principal amount ofU.S.$500 million and reopened for additional aggregate principal amounts ofU.S.$500 million on October 19,2006 and approximately U.S.$277 million on November 14,2006. The Staff, on Noyember 1,2006, granted no action ~eliefin respect ofthe two reopenings. Uruguay is proposing to make separate offers for each eligible Existing Bond to either tender for cash or to exchange for a new bond that is not the subject of this no action relief or Reopened Bonds tlrrough an exchange conducted by the Dealer Manager that will consist of a fixed-spread offer (the "Exchange Offer") pursuant to Uruguay's effective shelf registration statement on Schedule B to the U.S. Securities Act of 1933, as amended (the "Securities Act"). The terms and conditions of the conditional cash tender offer and Exchange·Offer will be described more fully in a prospectus supplement, the accompanying prospectus and related electronic letter oftransmittal to be prepared in connection with the conditional cash tender offer and Exchange Offer. Settlement of the conditional cash tender offer and Exchange Offer is expected to occur ten business days after the date the Exchange Offer expires. Uruguay's External Debt At December 31, 2007, Uruguay's total debt securities that are unsecured and payable by their temis in United States dollars were at least U.S.$ 8.2 billiondollars in principal amount. Market for the Bonds Based on conversations with the Dealer Manager, we understand the following to be true with respect to the market for the Bonds:
   The principal market for trading in the Outstanding Bonds in the United States and outside the United States is expected to be the over-the-counter interdealer market (the "OTC Market"). The Dealer Manager estimates that more than twenty dealers regularly place bids and offers for the Outstanding Bonds and are expected to regulatly place bids and offers after the issue of the Reopened Bonds. Ofthese dealers, at least ten are continuous market makers and are expected to be continuous market makers after the issue of the Reopened Bonds. The Dealer Manager acts as market maker in the Outstanding Bonds and other debt securities issued by Uruguay in connection with its general trading activities. The Dealer Manager estimates that the daily purchases and sales ofthe Outstanding Bonds by the Dealer Manager and its affiliates account for approximately 10% ofthe average daily trading volume ("ADTV") in the Outstanding Bonds, and they do not expect that their daily purchases and sales ofthe Bonds will ) / NYDOCSOl/1l52311

) account for more than 10% ofthe ADTV ofthe Bonds. Bid and ask prices for the Outstanding

Sonds in the OTC Market are widely available, via display on interdealer broker screens, display

.... __....-9P Tel~!..~!~~dJ~lo.9rrilierg electrg~ic il!fg!!!!ation§..~rylcesand ....2!herwise..._Th~e~l~!:-M~~~!- ____. q _ expe~ts that bid and ask prices for the Bonds in the OTC Market will be widely available, via the

same sources.

Although the Outstanding Bonds are not rated investment grade by a nationally

recognized statistical rating organization (the Outstanding Bonds are rated Bl by Moody's

Investor Services, Inc., BB- by Standard & Poor's Corporation and BB- by Fitch), the Dealer

Manager has informed us that theOutstanding Bonds trade primarily on the basis of a spread to

United States Treasury securities with corresponding maturities in a manner similar to trading in

investment-grade debt securities and in contrast to trading in many issues of high-yield debt

securities. Moreover, the Dealer Manager has informed us that the Outstanding Bonds generally

trade with a bid-ask spread of less than 1%, which is consistent with bid-ask spreads for debt

securities ofsovereigns rated BB or better but tighter than the typical bid-ask spreads for high

yield debt securities.

II. REQUESTED RELIEF AND POLICY BASIS
Rule 101 is an anti-manipulation rule that, subject to certain exceptions, prohibits persons involved in a distribution ofsecurities from bidding for or purchasing, or·inducing others to bid for or purchase, such securities until they have completed their participation in the distribution. Absent exemption therefrom, Rule 101 will force the Dealer Manager to be absent from the market for the Outstanding Bonds, and be unable to make a market in, the Outstanding Bonds from the period beginning five business days prior to the launch of the Exchange Offer until the day after the expiration date ofthe Exchange Offer (analogous to the completion ofthe distribution ofthe Reopened Bonds), which could result in the Dealer Manager being out of the market for close to two weeks, in this case disrupting an otherwise orderly market with potentially serious consequences. In order to avoid these serious consequences, and becal,lse we believe that the poliCies and purposes,underlying Rule 101 would not have been furthered by applying Rule 101 in this context, we hereby request the Securities and Exchange Commission, acting pursuant to paragraph (d) of Rule 10 I, to exempt the Dealer Manager and its affiliates from the prohibitions of Rule 101 with respect to trading activities relatingto the Bonds during the restricted period specified in Rule 101. )

NYOOCSOl/1152311

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I·
I
Exemption from the prohibitions of Rule 101 in the context ofthis transaction is, in our view, warranted for the following reasons: . ..(a).... "-··Purchase"g by·-the:DealerManagerarelliiITke1y·to-fiavei"slgIlincanfini!iad· on the price ofthe Bonds due to:
(i) the high liquidity and significant depth of the trading market in the Outstanding Bonds, particularly in light of the large aggregate principal amount outstanding ofthe Outstanding Bonds, and after giving effect to the Exchange Offer, the Bonds, (in excess of U.S.$1,277 million for the Bonds), (ii) the large number ofdealers expected to regularly place bids and offers for, or continuously make markets in, the Bonds, (iii) the Dealer Manager's belief that the Bonds are expected to trade primarily on the basis of spreads to the United States Treasury securities with the most nearly equal maturity date (in a manner similar to trading in investment-grade debt securities and in contrast to trading in many issues of high-yield debt securities), and (iv) the Dealer Manager's belief that the Bonds are expected to generally trade with a narrow bid-ask spread consistent with that for investment grade debt securities but tighter than that typical for high-yield debt securities, all as described in greater .detail in the preceding section ofthis letter. (b) The Outstanding Bonds and theRe<?pened Bonds are expected to be actively traded securities, as currently the ADTV of the Outstanding Bonds is approximately U.S.$50million with a public float of approximately U.S.$1,277 million. in aggregate principal amount. These figures are many orders of magnitude larger than the minimwn ADTV (U.S.$l million) and minimum public float value (U.S.$150 million) that would qualify common equity securities for the exemption afforded byRule 101(c)(1). The release adopting Rule 101 stated, with respect to that exemption, the following:
"The Commission continues to believe that an exclusion for actively-traded securities is appropriate. The costs of manipulating such securities generally are high. In addition, because actively-traded securities are widely followed by the investment . community, aberrations in price are more likely to be discovered and quickly corrected." )

NYDOCSOl/1152311

If the foregoing is true for a common equity security with an ADTV of only U.S.$1 million and a public float value ofonly U.S.$150 million, it is far truer with . __ .. . __ .__ .. 1~~~~1to l'!rg~jssues ofJix~g.::Li1~Q,m~._s~~.m:iJi~s.~m~lL~~lhe __ BQ!!.ds~ ..... .0 (c) Although the Bonds are not rated investment grade (but, rather, are rated Bl/8B-/8B-), the Dealer Manager believes the Bonds will trade in a manner similar to that of investment grade debt securities (see paragraph (a) above). Accordingly, the same considerations that led to the exemption for investment grade debt securities contained in Rule 101(c)(2) would apply to the Bonds as well. (d) Uruguay is a sovereign whose financial, economic and political affairs are widely reported on, including widespread research coverage by the investment community, and the Exchange Offer is expected to be global in nature rather than domestic, and the investor base is expected to be higWyinstitutional, with the result that . the investors generally do not need and would not expect the protections afforded by Rule 101. (e) Previously, when Uruguay, Argentina, Brazil, Colombia, Panama, Peru and Venezuela conducted global bond offerings, the Commission granted exemptions from Rule 101 and, in some cases, Rule 102 (or then-existing Rule 10b-6 under the ) Exchange Act) to allow trading in the securities being distributed under similar circurristances? The policy reasons underlying the exemptions given iil those transactions should apply in this case as well. Pursuant to 17 C.F.R. 200.81(b), we respectfully request on behalf of the Dealer Manager that this exemptive request and the response be accorded confidential treatment until 120 days after the date of the response to such request or such earlier date as the Staff of the Commission is advised that all of the information in this letter has been made public. This request for confidential treatment is made on behalf of the Dealer Manager for the reason that certain of the facts set forth in this letter have not been made public. 2 See, e.g., Republic ofUruguay, SEC No-Action Letters (November 1, 2006; August 4, 2006; January 24, 2006; June- 2,2005; June 20, 2003); RepublicafArgentina, SEC No-Action Letter (January 14,2005); Federative Republic ofBrazil, SEC No-Action Letters (July 7, 2004; June 21,2004; January 12,2004; October 15,2003; September 9,2003; July 3,2003; June 13,2003, April 29, 2003; March 22, 2000, and January 21,2000); The Republic ofColambia, SEC No-Action Letters (November 19,2003, December 2,2002); Republic ofPanama, SEC No-Action Letters (January 16, 2004; July 5, 2000; Novymber 18, 1998); Republic ofPeru, SEC No-Action Letter (February 8, 2007); and the Bolivarian Republic a/Venezuela, SEC No-Action Letter (September 22,2004). )

NYDOCSOl/1152311

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Please call me at (212) 848-5009 or my colleague Christopher Ross at (212) 848 4110 with any questions you may have concerning this request. vg2 Antonia E. Stolper cc: Joan Collopy ) )

NYDOCSOl/1 1.5231 I