Category: Mexico

Following a surprise $2bn dollar bond placement last week, Mexico plans to boost its domestic bond sales in Q1 2009, Hacienda says. It will double sales of its 20 and 30-year fixed-rate bonds to MXP2.0bn every 6 weeks and also sell MXP2.5bn in 10-year bonds every 6 weeks, up from MXP1.0bn in Q408. The government also aims to auction MXP4.5bn of its 3-year bond monthly, up from MXP3.1bn currently. The new plans come after it pared back sales in October of its long-term peso bonds through year-end, and offered to buy back up to MXP40bn of bonds. The repurchases will not continue. Mexico reopened international bond markets for EM issuers with a tightly priced $2bn 10-year 5.950% benchmark via Morgan Stanley and Goldman Sachs that took out a third of the sovereign’s 2009 funding needs.

Banorte has notified the Bolsa de Valores that it intends to sell up to MXP2.5bn in subordinated debt next year. The bank says the issuance is part of a 5-year program worth MXP15bn from which it sold MXN 2.75bn in 10-year bonds in June and another MXN5bn in March.

Miami-based Alsis Funds is looking to raise $100m on top of the $152m in assets it already manages, and foresees significant opportunity in affordable Mexican real estate. “Next year could probably be the best year we’ve ever had in terms of opportunity for the fund,” Alsis Funds managing partner Alfonso Montiel tells LatinFinance. The fund is marketing to US funds of funds seeking private equity type investment, as well as ultra high net worth individuals. The lock up is 7 years and some participants are first-time investors in LatAm. Montiel notes decent appetite from those investor bases, while also seeing reduced demand from pension funds. “A lot of them are reassessing their strategies, I think it’s going to be a difficult year for raising pension fund money,” he adds. The investor notes especially attractive targets in Mexico. “While you are still not seeing the kinds of bargains you see in the US in a similar asset class, because firstly there seems to be a lag, and secondly the economy is sound in Mexico – people are paying their mortgages,” adds Montiel. According to the investor, the fund is now being shown a lot more deals, allowing it to be increasingly selective. “The traditional players are not participating . . . funds like ourselves now get to see a dealflow that was unthinkable a year ago,” says Montiel. Alsis is focused on Mexico, but also interested in Colombia, Peru and Central America. The fund’s objective is to provide risk-adjusted returns through asset-backed structured transactions such as loans and other financial instruments originated in LatAm. Alsis invests in performing and non-performing mortgage loans, consumer loans, micro loans, trade receivables and lease contracts. “People are optimistic about the region, especially as an alternative to everything else that’s happening,” says Montiel. “We’re going to see a slowdown, but competition for investments has decreased significantly.” The Alsis Latin America Fund has $52m of LP equity fro

Mexico bagged 32% of next year’s debt service (capital plus interest) with last week’s blowout $2bn 10-year bond sale, according to the finance ministry. “Despite elevated international markets volatility, the government managed to place this benchmark bond at a cost close to the lowest achieved in the past for the same tenor,” says Hacienda. The Global 5.950% of 2019 priced at 99.784 to yield 5.980%, or 390bp over UST. Ministry data shows a UMS 10-year yielding 5.69% in September 2007, 5.74% in March 2006 and 8.66% in January 2001. According to the government, demand was $4bn and the deal was placed with 150 institutional investors, mainly in North America, Europe and Mexico. “This placement allowed the government to increase and diversify its investor base,” says Hacienda. The transaction was executed at just 40bp above the 2017 – according to the leads – versus expectations of at least a 50bp concession taking into account recent US high grade pricing. Bankers hope it paves the way to an active January for bond issuance.

Mexican housing developer Corporacion Geo says it expects to continue to have access to peso financing and that existing bank lines are solid. “Commercial banks have recently confirmed their commitment to maintain Geo’s current credit lines, and construction loans have also been reconfirmed; GEO therefore has more than enough lines to renew the current bridge loans, if they are needed,” says the company. Geo says it successfully refinanced all debt maturities for 2008, despite “demanding and cautious” credit markets. It adds that a MXP200m December debt placement is confirmation that well-positioned companies still have access to the domestic debt market. “Furthermore, our joint venture (with Prudential and Banorte) reaffirmed their long-term commitment with Geo,” says the borrower.

Mexican cement giant Cemex plans to sell its stake in TCL Group, the holding company for Trinidad Cement Company, say people close to the matter. Cemex owns almost 50m shares in TCL, which last week was trading at TTD4.75. As such, the stake is worth just under $40m, or TTD238m. Cemex is selling some assets with an estimated enterprise value of $2bn as it looks to address a mountain of short term maturities. One corporate credit analyst covering the company says he expects that to yield at best $1.5bn in revenue, considering market conditions for secondary sales. The company is amending covenants on all its loans and extending tenors on close to $4.7bn in loans. “They won’t sell anything that is worth more than $400m because it would be difficult for any acquirer to raise the financing,” says one New York-based analyst covering the credit. Cemex’s LatAm, CentAm and Caribbean assets account for some 15% of the entire company’s Ebitda, according to ING.

Citi is cutting Mexico equity to underweight from neutral and adding to an overweight in Chile, while also projecting dollar-adjusted returns of 41% in LatAm stocks next year. “All of these returns should be expected after a Q1 pullback in regional markets,” says the shop, which expects end-2009 market targets of 55,000 on the Bovespa, the Mexican bolsa at 24,000, Chile’s IPSA at 2,900, Colombian IGBC at 10,500 and Peru’s General ending at 9,500. Citi anticipates an early-2009 new relapse of regional markets towards the lower end of current trading range as the Q4 report card comes in, dented by a very weak global economy and poor corporate releases. “We expect a strong upside breakout of equity markets from April/May on, as investors anticipate the bottoming out of the US and global economies,” says the shop. Its economists expect global GDP to rise by just 0.5% in 2009, including a 1.5% contraction in the US. EM should grow by 3.8% in 2009, accounting for over 100% of global growth, while it expects LatAm to slow to 1.6% expansion in 2009, with Brazil at 2.2% and Mexico declining by 0.2%. Citi is overweight Brazil, neutral in Colombia and underweight Peru and Argentina. “We stay largely defensive in sector terms for the near term. It is too early for the full “recovery trade”,” adds the shop.

Mexico has cracked open the international bond markets for EM issuers with a tightly priced $2bn 10-year benchmark that takes out much of 2009 funding needs. The surprise surgical strike on markets assumed to be firmly shut for LatAm breathes life into fixed income and could spur fresh high grade activity in early 2009. The Global 5.950% of 2019 priced at 99.784 to yield 5.980%, or 390bp over UST and was heard trading at 100.25 (385bp) late Thursday. Guidance was 400bp area and the deal was executed at just 40bp above the 2017 – according to the leads – versus expectations of at least a 50bp concession taking into account recent US high grade pricing. Bankers away from the Baa1/BBB+ deal had expected the first LatAm issuers back to pay 60bp-100bp, but UMS was helped by recent firming in US fixed income and a relatively solid reputation. “The market was really at its peak and we also saw that in the sovereign space,” says Elizabeth Dennis, head of LatAm syndicate at Morgan Stanley, joint lead on the deal with Goldman Sachs. “It’s a great signal, everyone has been waiting for the EM market to reopen.” Mexico also benefits from scarcity value. It was last in the market in January with a new $1.5bn 2040 bond priced at 99.930 and 6.050% coupon to yield 6.055%. JPMorgan predicted in October that UMS would not issue at all in 2009, when it will make coupon and amortization payments of just over $8bn. Buyers of Thursday’s deal were 60% from the US, 35% LatAm (mainly Mexico) and 5% Europe. The bulk was dedicated EM, with some cross-over high grade, according to Dennis, who adds that the transaction covers most of Mexico’s 2009 funding requirements. There is a make whole call at UST+50bp and maturity is March 19 2019. Bankers at rival shops tip their hats to the first major bond issuance in months. “They should be extremely happy,” says a senior DCM official. “It shows the market is hungry for sovereigns,” adds the banker, saying that the transaction bodes well for LatAm volu

Grupo Gigante has sold its stake in Radio Shack to Tandy for MXP563.2m after the two did not reach an agreement on how to expand the chain in LatAm. Proceeds from the sale will likely be used to finance future acquisitions by Grupo Gigante. In a letter to the BMV, the company says proceeds will “complement and reinforce the consolidation and growth strategy.” Spokesmen from the companies could not say how the deal is being financed. According to Actinver analyst Marisol Huerta, Radio Shack contributed to 14% of Gigante’s revenue in 2007. She also says Gigante has $400m in cash, which allows the company to look for acquisition opportunities. Gigante recently said it would invest up to $50m to expand Office Depot de Mexico – in which it holds a 50% stake – to Colombia, possibly through acquisitions.

Mexico’s Cemex is paying a significant premium to term out as much as $4.7bn in loans by 1-2 years, following downgrade to junk amid looming nearby debt maturities. The refinance involves bilaterals and part of a 2006 Rinker acquisition facility. Bankers on the deal say the company hopes to close renegotiations by the end of the year, but will likely end up finalizing the process early in 2009, since credit committees are all but closed for calendar 2008. On the $6bn acquisition facility, Cemex is asking lenders to extend maturities for a portion of the B tranche with a value of $1.5bn-$2.0bn until December 2010, from a scheduled end-2009 due date. To get banks to term out 12 months, Cemex will boost total payback including margin and fees to Libor plus 200bp through 2009, and Libor plus 225bp-250bp through 2010, depending on ticket size and currency, from 40bp originally, according to a banker close to the talks. Cemex is also asking bilateral lenders at the holdco level to extend on up to $900m, while bilateral lenders to Cemex Espana are requested to refinance $1.8bn. Two new joint bilateral facilities (JBFs) – one for each borrowing entity – are being created so as to group bilats in a basket that includes different maturities and lenders. Both JBFs mature in February 2011 and carry rates equivalent to Libor plus 200bp-300bp. Most of the loans Cemex raised in 2004-2007 priced well beneath Libor+75bp. In general, the process is gaining positive momentum, though some banks are choosing not to extend and will be demanding timely payback, say people involved the deal. BBVA, Citi, HSBC, RBS and Santander are leading the refinancing.