Category: Mexico

Following the success of a debut first loss guarantee venture with the State of Mexico’s jumbo refinancing, Banobras seeks more applications for its new product. Typically a creditor to states and municipality, the development bank’s function has been usurped by ample private liquidity. “We’re substituting that role with being a guarantor,” Banobras president Alonso Garcia Tames tells LatinFinance. State of Mexico last month wrapped up the final phase of a MXP25.2bn refinance, extending duration and slashing the price on 87% of its debt, using a 27% guarantee from Banobras. The enhancement was designed to get the state the best possible rating with the smallest possible commitment, says Garcia. In another new feature for Banobras, the bank was structuring agent on the state’s deal and also acted as intermediary on swaps to fixed rate. Even after paying for the guarantee, structuring and swaps, State of Mexico’s all in cost was a weighted average spread of 47bp over 28-day TIIE versus a 170bp spread before the refinance, according to Garcia. “It was more competitive for the state [than funding alternatives],” says the official, adding that it saves the state MXP2.4bn in debt service for the rest of the Calderon administration. “It’s a very important deal for the local markets because it shows the development of the Mexican market in the last few years,” he adds.

Mexico’s Grupo Ixe Financiera is heard close to agreeing to acquire the GMAC Financiera and GMCA Hiopotecaria units from Residential Capital. Negotiations between the niche Mexican bank and North American lender that has lost millions in the US subprime crisis were announced May 20. The assets of the combined units would be more than $1.7bn, according to S&P. This would promptly make Ixe a player in the growing Mexican mortgage market. The agency, however, has placed Ixe on credit watch negative, due to the high leverage – about MXP12bn in debt – that would come from the union.

Fitch has placed Mexican home appliance manufacturer Mabe’s BBB minus rating on watch negative, including senior notes due 2015. The action reflects risk and uncertainty following the recent announcement from GE, its major stockholder that it is reviewing strategic options for its appliances business, which include a strategic partnership or joint venture, spin off or sale of the business. Last week S&P also placed Mabe on credit watch negative. Meanwhile, GE chief executive Jeffrey Inmelt has named Mabe as one of the potential buyers of its appliance business, wires report.

Mexico’s Banorte plans to sell about MXP3bn of tier-2 subordinated debt, followed by a state and municipal debt securitization to the tune of MXP5.5bn later in the year, investor relations officer David Suarez tells LatinFinance. A roadshow for the sub-debt is planned for June, with Banorte’s own DCM desk handling the sale. Suarez says the issue will likely be a 10-year non-call 5 and is hoping for pricing of 50bp-100bp over TIIE. Banorte, Mexico’s fifth largest bank and the only large locally owned financial institution, sold MXP3.6bn in 10 and 20-year bonds in a similar deal in March, pricing a 2018 tranche at 60bp over 28-day TIIE. Suarez says the upcoming deal will likely price wide of that. “Conditions were much better in March, because there were expectations that rates in Mexico were going to come down,” he says. “The yield curve has shifted upwards and the long part of the curve is more expensive now,” he says. “It’s probably going to be a higher interest cost, but it’s still going to be below the average for Banorte’s cost of capital.” Suarez says the debt sale will be tier two because the bank’s tier one window is almost full. There is no date set yet for the state and municipality debt securitization.

As anticipated, Pemex has returned to market for a total of $1.5bn in funds. The Mexican state-owned oil producer reopened $1bn of its 5.75% 2018 notes at 99.83 to yield 5.77%, or UST+175bp, after providing guidance of 175bp-180bp earlier in the day. It also priced $500m in new 2038 bonds at 99.699 with a 6.625% coupon to yield 6.640%, or UST+195bp, deciding against a reopening of its 2035s. The two tranches combined saw about 2x oversubscription, according to a banker managing the sale, with demand skewed toward the 2018. The 175bp spread was much tighter than other Triple Bs issuing Wednesday, including BNDES at 237.5bp, bankers note, perhaps limiting demand. Proceeds will go towards Pemex’s investment plan, which calls for raising $5bn this year, including $2bn in the local and international bond markets. HSBC, JPMorgan and Lehman Brothers managed the 144a sale. Pemex originally sold $1.5bn of the 2018 through Credit Suisse, Deutsche Bank and Merrill Lynch in October.

Singapore sovereign wealth fund Temasek Holdings has hired a former Barclays executive to head its Mexico office as it aims to boost investments in Latin America, according to Reuters, which cites a company statement. Lorenzo Gonzalez Bosco will be managing director for Mexico investment, while the fund, which manages over $100bn, will also relocate Alan Thompson, its LatAm investment MD to Sao Paulo later this year, according to Reuters. The fund is focused on Asia but reportedly sees long-term potential and attractive investment prospects in LatAm.

This week’s purchase of a 20% stake in Mexico’s Grupo Financiero Inbursa by Barcelona-based investment group Criteria CaixaCorp is more a play on North America than the start of a LatAm push, according to a spokeswoman at the acquirer. The Spanish group is focusing its expansion strategy on Central Europe, Asia, and North America which it sees including Mexico through its membership of the NAFTA. Criteria will issue new shares in a capital increase and launch a public bid for GFInbursa shares at MXP38.5 per share for a total investment close to EUR1.5bn, it says. The investment will be financed with bank debt, Criteria says. The transaction is subject to the ratification of the board and shareholders of GFInbursa, as well as Mexican and Spanish regulators, but expected to close in November. Mexican billionaire Carlos Slim and family will maintain majority ownership of Inbursa, says Criteria.

S&P has changed the outlook on Ford Credit de Mexico’s mxBBB- to negative from stable following a similar action on parent company Ford Motor. The latter faces economic challenges in the US and has announced that it does not expect its auto business to be profitable until 2009, the agency says.

The Mexican equity market is expected to weaken over the summer, according to Citi, following US macro weakness and less global investor complacency. “A break below 30,000 is possible,” the shop says. A rally to 35,000 is expected by year-end on hopes of better US and Mexican economic news, Citi adds. The shop tips Walmex, Homex, ICA, Mexichem and Asur as top picks in the Mexican market, which was trading over 31,000 Friday. Citi remains overweight. “Sound macro fundamentals allow Mexico to lean into economic weakness with fiscal easing,” says Citi. “Higher inflation, however, poses a policy risk,” it adds. The primary Mexican equity market appears to be picking up. Genomma Lab Internacional is heard in the works, targeting a raise above $300m via IXE and Santander locally, Merrill Lynch and UBS internationally. Timing should be roughly in line with the BMV’s own IPO, which is slated to price mid-June. The latter could raise $440m and represents a significant landmark for Mexican equity markets. The initial range for the deal via BBVA and UBS is MXP14.00-MXP19.00, Dealogic says.