Category: Bonds

Mexico shook the DCM markets awake Tuesday and extended its yield curve out to 2040 with a new benchmark. The $1.5bn 2040 bond priced at 99.930 with a 6.050% coupon to yield 6.055%, or 170bp over UST, the bottom of 170bp-175bp guidance. The order book reached $3bn, say bankers on the Baa1/BBB+ transaction, and it was upsized from $1bn. One banker close to the deal notes that it came just 5bp wide of a $4bn 30-year GE Capital priced the same day at 165bp over UST. However, those away from the issue found the transaction to be slightly cheap, suggesting that Mexico was paying a premium of a few basis points to reopen the market for LatAm in the prevailing hostile external market conditions. “Figuring out the premium for a relatively rare issuer like UMS is not easy,” Mexico’s head of public credit, Gerardo Rodriguez, tells LatinFinance. He adds that after discussions with investors, Mexico priced using as a reference the UMS ’34, which at the time was trading at 130bp-154bp. “We upsized to $1.5bn and still kept to the low end of guidance,” adds Rodriguez. Proceeds refinance debt, of which the sovereign has about $3.2bn coming due this year. The sale was managed by Credit Suisse and Deutsche Bank.

It’s shaping up to be a slower first half of January than usual in LatAm DCM, with uncertainty about external conditions keeping issuance volume well below last January’s seasonally brisk spree. High-yield issuers appear to be waiting to see what pricing Brazilian steelmaker Usiminas is able to get on a $400m 2018 notes issue. The Baa3/ BBB- deal is now roadshowing, taking in Los Angeles, New York, Boston and London, with pricing expected as soon as Friday. Bankers away from the transaction, led by JPMorgan and UBS expect a yield in the low 7% area, owed to the issuer’s strong name and low outstanding debt. If the market opens up, other high-grade frequent issuers could follow, notes one banker, while the high-yield deals yanked late last year may continue to wait. Sovereigns are in no hurry, the banker adds.

It’s shaping up to be a slower first half of January than usual in LatAm DCM, with uncertainty about external conditions keeping issuance volume well below last January’s seasonally brisk spree. High-yield issuers appear to be waiting to see what pricing Brazilian steelmaker Usiminas is able to get on a $400m 2018 notes issue. The Baa3/ BBB- deal is now roadshowing, taking in Los Angeles, New York, Boston and London, with pricing expected as soon as Friday. Bankers away from the transaction, led by JPMorgan and UBS expect a yield in the low 7% area, owed to the issuer’s strong name and low outstanding debt. If the market opens up, other high-grade frequent issuers could follow, notes one banker, while the high-yield deals yanked late last year may continue to wait. Sovereigns are in no hurry, the banker adds.

Brazilian steelmaker Usiminas is taking the opening crack at LatAm cross-border DCM, which is otherwise dead as bankers slowly get back to work amid tricky market conditions. A roadshow starts today for the sale of up to $400m in 2018 144A/Reg S bonds. The exact sale date remains to be set. The high-grade issuer has said it plans to raise at least $3bn over the next two years to fund basic capital expenditures and manage the balance sheet. The Baa3/ BBB- deal is led by UBS and JPMorgan.

Dresdner Kleinwort is effectively closing down its New York-based DCM business, save for a few sales and trading people. It is shifting resources closer to local markets, according to executives formerly with the firm. The change appears to reflect an internal decision to exit unprofitable businesses around the globe – including the US bond business – and reduce headcount in DCM. The German bank is heard to have pared down its eight person LatAm DCM team to four through layoffs. The remainder in New York will join local bankers and the practice for the entire region will be run out of Sao Paulo, according to people familiar with the matter. Carlos Rosso, a DCM originator based in Mexico, and Glenn Peebles, in charge of Brazil origination, will both continue at their posts, with the latter expected to preside over a Dresdner expansion in Brazil. DCM veteran Enrique Bustamante, head of LatAm corporate finance based in New York, was laid off. Rodrigo Gonzalez, a DCM originator also based in New York, is heard still with the team and may move to Sao Paulo. In August, Dresdner set up a LatAm M&A practice in Sao Paulo, with Gabriel Nores running the advisory effort and Eduardo Bertao, a Brazilian formerly based in London, focusing on the utilities sector. A Dresdner spokeswoman declined to comment.

Bankers got $433m in DCM revenue in 2007 from LatAm and the Caribbean, according to Dealogic. This was a 12% increase from 2006. The region’s DCM volume was also up slightly, at $79.2bn in 2007 from $74.9bn in 2006. Mexico finished the year strongly, with Q4 volume up 105% over 3Q, lifting its 2007 total to $26bn. The region’s numbers are in contrast to an 8% drop in 2007 global DCM volume, to $6.06trn. Despite raising a record $3.96trn through June, a rough second half saw only $2.10trn, a 47% drop from the first half and the lowest half-year volume since 2002. Global DCM revenue totaled $22bn, almost flat to the $22.1bn in 2006. EM volume fell 7% in 2007 to $2.17trn, while revenue dropped 3% to $7.5bn, following a dramatic second-half slowdown where EM volume dropped 53% to $688.1bn from the first half.

Mexican retailer Grupo Gigante plans to buy back $237.6m of its 8.75% 2016 senior notes, tendered for in a buyback offer worth $260m. Also last week, Gigante shareholders approved the sale of 206 supermarkets to rival Organizacion Soriana for $1.35bn. Gigante is refocusing its business on real estate, its Toks restaurant chain, and joint ventures it has with RadioShack and Office Depot.

HSBC has appointed LatAm veteran Gerardo Mato to head of financing and advisory for the emerging markets. He will run advisory, equity and DCM in EM, while also leading the origination efforts of the domestic global markets teams in the region. Mato will also retain oversight for the liability solutions group in the Americas. He will report to Rod Prat and Jose Luis Guerrero, co-head of global markets, Americas. LatinFinance hears that HSBC is planning a number of high profile hires in LatAm in the short term.

Mexican retailer Grupo Gigante plans to buy back $237.6m of its 8.75% 2016 senior notes, tendered for in a buyback offer worth $260m. Also last week, Gigante shareholders approved the sale of 206 supermarkets to rival Organizacion Soriana for $1.35bn. Gigante is refocusing its business on real estate, its Toks restaurant chain, and joint ventures it has with RadioShack and Office Depot.