America Movil (AMX) could achieve the region’s lowest-ever coupon on a 10-year if it were to tap the markets now, and bankers have been heard pitching the idea to the Mexican telecom giant as it looks to spend up to MXP76.34bn ($6.51bn) to buy back the rest of the Telmex shares it doesn’t own. However any deal from the blue-chip issuer is unlikely to be imminent, say bankers. Not only is CFO Carlos Garcia Moreno only just coming back from holiday this week, but he is not the type of person to rush into a transaction no matter how low yields are, they say. Furthermore the company is sitting on $7.5bn in cash and it has recently closed a $4bn dual-tranche loan at very attractive spreads. With US telecom AT&T printing this week a $5bn multi-tranche bond offering that included a 2021 with a 3 875% coupon, bankers think AMX could meet with similar success. Indeed, AMX is a stronger credit with an A2/A/A rating against AT&T which carries an A2/A-/A rating, with two negative outlooks. “AMX is not like AT&T, which needs to keep raising debt,” says one DCM official. “But it is not just because AT&T that bankers are pitching AMX. They are looking at where US Treasuries are and it makes sense to come. Not only could they get their lowest coupon, but it would be the lowest coupon out of Mexico or any corporate out of Latin America.” A sub 4% coupon is not beyond the realm of possibility and at that level AMX would beat Coca Cola’s Femsa’s (KOF) record 4.624% coupon set in early 2010. Still the borrower can afford to wait and will also be looking at other factors such as new issue premiums which are likely to be higher now than when it did its dollar deal in early 2010. “Let say they do $2bn, I think they might pay 10bp (new issue premium) or more, and I don’t see them willing to do that,” says another banker. And although it may seem somewhat irrelevant given the coupon size, spreads would also be wider than the 140bp it achieved on its last USD 10-year. Bankers say UST yields
Category: Bonds
Chilean Pharmaceutical Maker Plans Bonds
Laboratorios Andromaco has filed a shelf to sell domestic bonds in Chile. The maker of dermatological and other pharmaceutical products will be able to issue off a UF2m program with tenors of up to 10 years and off a UF2m program with maturities of up to 30 years. It does not name a lead manager. Proceeds are marked for investments, working capital and debt refinancing.
Citi Names Brazil Originations Head
Citi banker Mariano Gaut has been named head of Brazil capital markets origination at the US bank. The move comes as Citi tries to make its mark in the region’s largest economy after recently hiring Andre Kok as managing director and head of global banking for Brazil. Gaut comes from Citi in the US where he was head of the bank’s equity-linked business. He will move to Sao Paulo in his new role and will work alongside the Brazil global bank team led by Kok. Gaut will report to John Chirico and Richard Zogheb, co-heads of CMO. Meanwhile, in New York, Chris Gilfond and Mario Espinosa will continue to co-head LatAm DCM, while Richard Blackett and Juan Carlos George will do the same for LatAm ECM. Both New York teams will continue to direct strategy across LatAm, including Brazil.
Colombia’s Popular Preps Local Foray
Colombia’s Banco Popular is set to issue COP250bn-COP400bn ($140m-$225m) in local bonds today. The bank is able to select from 1.5, 2 and 3-year tenors set to the IBR rate, and 4-year bonds indexed to the IPC. Proceeds will support the bank’s capital base. Popular is managing the sale, rated AAA on a national scale.
Elektro Prices Domestic Bond
Elektro has completed a BRL300m ($190m) bond sale in Brazil’s domestic market. The utility and AEI subsidiary secured a BRL150m 2016 tranche to pay the DI+0.98%, coming in under a 1.12% ceiling. A BRL150m IPCA-linked 2018 tranche pays a fixed 7.68%. Both portions feature a 1-year grace period and amortize in equal parts in the final 3 years. Proceeds are going to repay existing debt and for working capital. Banco do Brasil and HSBC managed the sale, done under the rule 476 restricted format.
EEB Heard Mandating Banks
Colombian utility Empresa de Energia de Bogota (EEB) is heard mandating Deutsche Bank and Santander for an international bond to help fund an upcoming call on its $610m 8.75% 2014s. The NC4 senior unsecured notes were issued in 2007 to partially pay down a bridge loan used to finance the $1.5bn acquisition of natural gas distributor Ecogas. The bonds are callable in October at 104.375, at 102.88 in 2012 and at par in 2013 and after. The bond also carries a make-whole call prior to year four at 75bp and a change of control put at 101.00. EEB bonds were trading Tuesday afternoon at 2.81% on yield-to- worst basis and at a price of 104.35-105.5. ABN AMRO, now RBS, was the sole bookrunner on the last issue with BBVA, Caylon and Mizuho working as joint lead managers.
ENA Ventures Forth In Quiet Market
Panama’s Empresa Nacional de Autopista (ENA) emerged with official guidance Tuesday on a dual-tranche $395m issue, offering investors between high 100s to mid 200s over the Panama sovereign. Books were heard to be covered by Tuesday and went subject late afternoon ahead of expected pricing today. The deal comes amid continued uncertainty in the broader markets, leaving some accounts disinclined to participate in what is a relatively small and illiquid structured trade. Indeed the borrower is treading a somewhat lonely path this week in what has been a quiet LatAm new issuance market. Still unsteady markets haven’t deterred US high-grade names from tapping in recent days and this bodes well for the BBB minus/BBB rated ENA bonds. And despite a dearth of true comps, other investors have expressed satisfaction with the credit given the decent pick-up over the Panama 5.25% 2020s, which have been trading in the 3.54%-3.42% area. That compares to official guidance of 6% area on a $170m A tranche, with an average life of 8.40 years and a final maturity of 2025, and 5.25% area on a $225m B tranche, with a 4.59-year average life and 2019 maturity. The 144/Reg S notes will be listed on the Panama Stock Exchange, with collateral taking the form of collections from the Corredor Sur toll road and shares of ENA. Tranche A has a make-whole call at Treasuries + 50bp. Proceeds are to be used to refinance $150m of 6.95% amortizing 2025s that helped finance the Corredor Sur tollroad covering 19.5km of Panamanian highway. HSBC and Global Bank are leads.
Guatemala Sends RFPs for Foreign Bond
Guatemala has sent out RFPs to raise up to $500m in the international bond markets through a 144A/RegS offering, with submission deadlines set for August 26. But bankers are resigning themselves to competing on a fee basis as is standard practice in many Central American countries. “[It] will be a typical point-based antiquated RFP a la El Salvador that heavily favors the lowest fee above all else,” said one banker. Competition for such mandates have stirred up its fair share controversy, most recently after Deutsche Bank won sole lead spot on an El Salvador deal late last year with a 1bp fee. Proceeds from the Guatemala trade are expected to refinance its maturing $325m 10.25% bond due November 2011. This comes after S&P recently revised its outlook on Guatemala’s BB/B foreign currency rating to negative from stable. The rating agency noted that political polarization is hindering fiscal reform at a time when the country is suffering from low tax revenues combined with an increasing interest burden.
Banobras to Help Refinance State Debt
Mexico’s finance ministry plans to announce this week a program to refinance debt of some states. Specifics should emerge this week, but Banobras will participate by offering guarantees. “Though state debt is not a general problem, at about 2.5% of GDP, there are some governments that need to undergo refinancing operations to improve their financial positions,” it says.
Mexico Eyes Sale of Domestic 20-Year
Mexico plans to carry out another syndicated sale of domestic bonds as soon September, this time targeting a 20-year tenor and using a hybrid system of auctions and bookbuilding, public credit head Alejandro Diaz de Leon tells LatinFinance. “It is likely to take place in September, but let us see how market conditions evolve,” he adds. Such bookbuilding operations were started in 2010 and designed to allow the sovereign to issue a large offering in one fell swoop rather than having to build outstanding size incrementally through a series of auctions. This way the bonds would immediately qualify for inclusion in key indices and draw in a broader group of investors. However, the process has been fine-tuned along the way as the sovereign tried to create more efficient pricing mechanisms. The pure bookbuilding process of earlier issues created distortions as local investors often pushed back verbally on certain pricing levels only later to put in strong orders. So in its last issue of MXP25bn 2016s in July, public credit first established a maximum yield, in this case 6.10%, and then conducted an auction process through the 8 market makers while at the same time generating momentum beforehand through traditional bookbuilding, says Diaz de Leon. Investors can put in bids through one or all of the 8 market markers. “Instead of taking the risk we don’t have sufficient demand, it is better to have a market driven bookbuilding,” he says. “We still benefit from the market makers’ sales forces contacting investors and creating enough momentum to allocate (in size).”