Category: Mexico

Mexican entertainment company CIE closed Friday a buyback operation for outstanding 2015 bonds, with 93% of the securities tendered for cash and a premium. The company offered $1,025 per $1,000 in principal amount tendered. CIE will also pay a $30 premium for every $1,000 tendered before January 31. The 2015 notes had a coupon of 8.875%.

Mexico’s central bank left untouched the 7.5% overnight rate for a fourth consecutive month, citing “deteriorating economical perspectives around the world”, especially in Japan, Europe and its main trading partner the US. The bank insists it will keep a “close look” at the risk balance sheet in order to maintain the goal of an inflation rate of 3% for 2008. John Welch, analyst at Lehman, says Mexican inflation is within the target band but there is pressure from food prices. “However, food price inflation has not yet translated into generalized inflation expectations,” he adds. “In all, we believe that today’s statement remains fully consistent with maintaining our forecast for the TdF at 7.50% throughout 2008,” says Goldman. “A deeper downturn with negative effects on growth in Mexico would tilt the balance of risks toward an easing.”

Mexico’s Volkswagen Leasing plans to sell up to MXP2bn in 2011 notes via ING and BBVA Bancomer. The exact sale date remains to be set, but it is expected this month. The AAA locally rated deal would be the second issue from a MXP10bn shelf.

A MXP1.7bn 18-year construction loan supporting the Acueducto II project in Queretaro, Mexico is set to close syndication shortly. Leads HSBC, NordLB and Santander have added Banorte and Banobras to the roster, with each bank taking an equal piece. Pricing is TIIE plus 250bp. Final close is expected within the next two weeks. Sponsors ICA, Fomento de Construcciones y Contratas of Spain and the Mexican unit of Mitsui will fund the remainder of the MXP2.85bn project with equity. The consortium began construction in December on the110km project supplying 50m cubic meters of water per year to the city from the Moctezuma River. It is expected to begin operation in early 2010.

Mexico is expected to leave the overnight rate unchanged at 7.5% at Friday’s monetary policy announcement. Credit Suisse predicts that the central bank will use the same language when closing its policy statement, including a commitment to a 3.0% inflation target. “The central bank will address in its communiqué the worsening of the growth outlook for the US and the aggressive rate cuts by the US Federal Reserve,” says the shop.

S&P has affirmed its BBB- (stable) long-term corporate credit rating on Mexico’s Controladora Mabe, citing the favorable credit effects of a joint venture with General Electric. The agency also laud’s Mabe’s leading position in Mexico, supported by “adequate operational performance,” as well as revenue and geographic diversification, increasing participation in the US and an important position in Canada. On the downside, S&P notes Mabe’s intense competition in its main markets, relatively high leverage, and somewhat aggressive expansion plans that could lead to higher debt levels. The agency says it might consider an upgrade if Mabe maintains total debt-to-Ebitda and funds from operations-to-total debt ratios of 1.7x and 30%, respectively, as well as positive free operating cash flow generation. A downgrade would follow if the company’s operational performance and strategies to enter new markets lead to a total debt-to-Ebitda ratio of 3.0x, S&P adds.

ING Group has agreed to sell to sell part of its Mexican Seguros ING unit to AXA for $1.5bn. ING will divest its health and life insurance lines, HMO and bonding business, in order to focus on its existing Mexican pension and annuities operations. ING, which will realize gains of EUR150m-EUR200m on the sale, is funding the purchase with its balance sheet. It is unclear whether it will seek outside funding. Debevoise & Plimpton and UBS advised AXA on the sale, while Cleary Gottlieb Steen & Hamilton and JPMorgan reportedly advised ING.

Bank loans to Mexican corporates ticked up noticeably in the last three months of 2007, according to a Banxico survey released Friday. The portion of respondents that said they took on a bank loan in Q4 rose to 26% from around 23% in the previous quarter, nearing a four year historical high. Over 63% of the respondents said the funds were used for working capital. Many companies also cited expensive interest rates on bank loans as the main reason they did not take out a loan. Of the 74% that did not access the bank market, 32% said it was because of the cost of funds. Over the second half of 2007, the sharpest pickup in bank borrowing came from investment grade companies.

Mexico will this year embark on an antitrust reform, Eduardo Sojo, the country’s secretary of economy, said Friday. “This is the year to reform and strengthen our antitrust environment and eliminate any artificial barriers to entry in our economy,” said Sojo, speaking at the Mexican Housing Day conference in New York. Mexico has recently signed an agreement with the OECD to conduct a study to determine if there are any barriers to entry in any of the country’s sectors, said the minister. And if any are found, Mexico will look to change and implement legislature to remove those barriers. The move is a bold one for Mexico, whose private sector is consolidated in the hands of a few powerful groups. There are less than 40 actively traded entities in the country and companies like Telmex, America Movil and Cemex hold a disproportionately large share of Bolsa’s total market cap. Among the goals of the secratariat for this year are to enhance the business and entrepreneurial environment, consolidate the country’s industrial policy and increase competition, says Sojo. “This year will be a more difficult year for Mexico, but we will take the opportunity to make the right decisions.”

Mexico’s BBVA Bancomer plans to test the local waters with its own 2011 senior secured bond. The bullet maturity floating-rate issue will be between MXP3bn and MXP5bn in size and is set to price next Wednesday. The Triple A issue will be priced over TIIE.