Investors buy into new Mexico’s new dual debenture structure

Grupo Televisa’s $540 million-equivalent bond sale on May 7 demonstrates that the global peso structure (titulos de crédito extranjero) can extend beyond the only other issuer to date, América Móvil. When when América Movil pioneered the structure (which enables securities to be sold simultaneously to Mexican and international investors) in December 2012, lead bankers were circumspect about its applicability to credits that were not able to issue the scale of programme (circa $3 billion-equivalent in the next few years) to which América Móvil has committed itself.

However, Televisa’s potentially one-off transaction attracted demand more than five times the deal size, showing the strength in market appetite for Mexican credits and the Mexican peso. The BBB+ rated 30-year bond was priced at 99.757 with a 7.250% coupon to yield 7.270%, equivalent to mbonos (the sovereign benchmark) plus 185 basis points.

The deal was led by Citi/Banamex, Deutsche Bank, HSBC and Morgan Stanley, with about 70% sold to US-based investors.

Citi was also involved (along with BBVA and Goldman Sachs) on Femsa’s return to the international markets after a 14-year absence. The BBB+/A- rated Mexican company (which operates convenience stores, as well as having a 20% stake in Heineken and a 49% stake in bottler Coca Cola Femsa) demonstrated the attractive levels available in the dollar-denominated international market. Femsa sold a $300 million 10-year bond that priced at US treasuries plus 112.5bp and a $700 million 30-year bond that priced at treasuries plus 145bp.

Francisco Romano, local debt capital markets director at Banamex in Mexico, says that the markets are offering financing at levels that make it sensible for companies to pre-fund.

“If we see a signal from the Fed that there will be continuing liquidity, then spreads could stay [at present levels] or even go down in some cases,” he says. “If we continue to see those levels, then companies will definitely consider pre-funding.” He expects Mexican companies to seek to take advantage of the arbitrage opportunities available by raising funds in international markets, which are more pronounced for the lower-rated credits.

For the full story visit Euromoney

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