Category: Mexico

Pemex plans to sell $2bn-$3bn equivalent of bonds in the Mexican market, according to CFO Esteban Levin. The state-owned oil producer has recently requested approval for a MXP70bn 5-year shelf for local bonds. Total borrowing in 2009 should be $7.5bn-$10.5bn equivalent, Levin says. This would include including $1.5bn-$2.0bn from export credit agencies, $2.0bn-$2.5bn from bank loans, and possibly another $1bn in dollar bonds to follow $2bn placed in January. The net debt load should increase $2.5bn-$3.0bn this year. Pemex has not given any indication of the timing of a first local issuance, to be 1-20 years in tenor. It will be led by Santander and other banks will be named later.

Mexico’s Comerci has reached an agreement with four creditors to extend a standstill agreement past March 2 to March 23. Barclays, Goldman Sachs, JPMorgan and Merrill Lynch have filed to sue the retailer in US court, but agreed in late January not to pursue their demands while Comerci restructures debt. Comerci says it continues negotiating with creditors, without offering additional detail. The retailer filed for bankruptcy last year following a derivatives-induced cash squeeze that left the company with no resources to meet debt obligations. It is advised by Rothschild and Credit Suisse.

HSBC’s impaired LatAm loans increased 37% last year to $2.3bn, fueled by a 32% jump in Mexico, largely in credit cards driven by portfolio growth in personal lending, seasoning and higher delinquency rates. The bank says it has clamped down on underwriting, collection and customer acquisition, but says Mexico was also hit by credit quality deterioration among SMEs as the economy weakened. In Brazil, impaired loans rose by 34% due to growth in personal lending, deterioration in payroll and vehicle finance loan portfolios, and weakness in a number of real estate portfolios and corporates exposed to the sharp rise in the value of the US dollar in the second half of the year, says HSBC. The increase was less than last year, when LatAm new loan impairment charges rose by 63% to $2.0bn.

Pemex has applied to Mexican regulators for a 5-year MXP70bn program to sell bonds in the domestic market. The state-owned oil producer would issue fixed or floating-rate bonds at maturities of 1-20 years, according to documents filed with the Mexican Bolsa, which do not give any indications of timing or size. Santander has been identified as structuring agent and a bookrunner on a first issuance, with other banks able to be added later. Pemex sub-director of finance and treasury Mauricio Alazraki told LatinFinance last month that the state-owned oil company was considering a local markets issue this year, declining to state at what tenor or price. Mexico’s undersecretary for public credit Gerardo Rodriguez says the finance ministry is working with Pemex and state utility CFE on issuances that would serve to help open the market for corporates, noting that such AAA credits should expect 3-5 years tenor. Pemex has already tapped the dollar debt market this year, raising $2bn in 8% 2019 bonds priced to yield 8.25% in January, on about $6bn in demand. The issuer faces $19.4bn in 2009 investment needs and is set to increase its net indebtedness by $2.5bn-$3.0bn.

Bids for Mexico’s Paquete del Pacifico tollroad (Farac II) auction were few and far between, causing some consternation for the government. “Without a doubt there was some surprise about the big differences [in the bids,]” Alonso Garcia Tames, director of Banobras, which is running the process, tells LatinFinance. The high profile follow-up to the Calderon administration’s MXP40bn 2007 Farac I, drew meager bids from just 2 interested parties Friday, and was scrapped. Offers from Mexican operators ICA and IDEAL fell short of the minimum. IDEAL bid MXP6.77bn for one concession in the package, while ICA proposed a much smaller MXP2.54bn. The government’s target price was not disclosed. Bidders were asked to offer a value for one of the new concessions, while the winner would be awarded the entire package, assuming all maintenance and construction costs. The total was estimated most recently at around MXP35bn. Banobras officials said late January they were confident there would be lots of competition and plenty of pricing tension at auction. Three Spanish participants in the final round – OHL, Iridium and Globalvia – offered only apologies for not bidding. Garcia says the past week’s poor global market performance likely led bidders to revise downwards projections for tollroad usage, while also raising estimates for cost of construction and maintenance. Bankers away from the process wonder if ICA even wanted to bid, given its low offer. ICA officials did not return calls seeking comment.

Mexico has cancelled an auction for the Paquete del Pacifico tollroad package, also known as Farac II, after extending twice. Bids for the estimated MXP40bn network were due Friday, but the transport ministry says the 2 received fell short of the minimum. Bids were received from a consortium of Controladora de Operaciones de Infraestructura and Caminos y Carreteras del Mayab – both units of Grupo ICA – and Promotora del Desarrollo de America Latina. Letters of apology for not participating were sent from Obrascon Huarte Lain and a consortium made up of Global Via Infraestructuras, Mexicana de Global Via Infraestructuras, and HSH Investments Limited. The ministry says it will work with Banobras and Fonadin to alter the package in response to market conditions. The deal is seen as one of the cornerstones of president Calderon’s infrastructure push.

US government participation in Citi is unlikely to trigger an immediate sale of Banamex, but under Mexican law the finance ministry will decide, say local attorneys. Participation in the capital stock of a Mexican bank by a foreign government could force divestment, says Rodrigo Conesa Labastida, partner at Ritch Mueller in Mexico City. “The ministry of finance may order the sale of the shares owned by the government to the Mexican bank,” says Conesa. He adds that the price would be 50% of the lowest of either book value or market value of the shares. “Proceeds from the sale would be kept by the Mexican government as a fine,” says the lawyer. However, he adds that this will likely not happen. “In practice this is not possible because the participation of the US Treasury in the capital stock of Banamex is indirect, so the ministry of finance cannot order the sale of the shares,” says Conesa. “Revoking the banking license is a theoretical possibility, in practice this will never happen,” he adds. The government is therefore challenged with interpreting the banking law in the light of the current crisis. “I don’t think [the US government stake] will trigger, from a legal point of view, that Banamex should be sold,” says Rafael Robles, a partner at Galicia y Robles, noting that if the US government equity is only supporting the bank, it may not be found to violate the law. Even if there is no legal imperative, political pressure may become too great. Banamex is a sensitive case, as an iconic institution that has for many years been a leading domestic bank. It operates 19% of the Mexican system, according to Moody’s. Talk of local groups forming to buy Banamex continue to do the rounds. Itau is also mentioned as a potential bidder if Citi opts to sell.