M&G Heard Extending Investor Talks

M&G Finance is heard extending fixed income investor meetings into next week as it looks to issue a 144A/RegS for life in $500m 7NC4 senior unsecured notes, with rumors of a 10-handle pricing. The US subsidiary of Italian chemical company Mossi & Ghisolfi International, with extensive operations in Mexico and Brazil, initially launched its roadshow July 25-29 in the US before wrapping up in London on Monday. Investors say they like the business, but express concern over a decision taken by the PET resin producer, under its hybrid bond agreement, to suspend coupon payments during the 2009 financial crisis. The company has since seen improvements in 2010 and 2011 supported by a favorable operating environment and declining competition seen by chemical commodity manufacturers. In 2007, M&G issued EUR200m 7.5% hybrid bonds and later bought back EUR128m of the bonds at 45% discount. The remaining EUR72m of the hybrid bond is held by third parties. “The company has a decent business but had a bad run when it penalized investors,” notes one banker. Fitch expects M&G’s net leverage ratio to increase to a peak of 4.4x in 2013 from 3.1x in December 2010 due to investments in new PET and PTA plants totaling around $700m. Use of proceeds is intended for capex, debt repayment, liquidity and working capital. Some investors looking at the credit are seeking a concession due to it being a first time issuer, its lower rating, small size, lack of strategic partnerships, and rising leverage. The bonds are rated B3/BB by Moody’s and Fitch. JPMorgan is the sole lead.