Santander Mexico has raised $1.3bn from the sale of LatAm’s first Basel III-compliant Tier 2 bond, upsizing from a planned $1bn. The non-convertible 2023 NC5 subordinated note was seen offering at least a 200bp pickup to where Santander Mexico would price a new senior bond. Starting with mid-6% indications Tuesday, the book steadily grew overnight from $550m to $1.0bn with interest from London-based and private Swiss accounts. Final demand was more than $3bn, and 20 minutes before the US Fed’s tapering announcement Wednesday, the issuer priced at 99.235 with a 5.95% coupon to yield 6.125%, or UST+458bp, tight to 6.25%-area guidance. Santander’s parent purchased 75% of the 144A/Reg S offering, as planned, leaving $325m to be sold to investors. The bond was up 0.50-1.00 points in the grey Wednesday, traders say. With no direct comps, the deal was seen as an exercise in price discovery. Santander Mexico’s 2022 senior bond was seen trading at UST+245bp, indicating a pickup for the new Tier 2 of more than 200bp. Newer LatAm Tier 2s trade around 125bp-250bp wide to senior bonds, according to a person following the sale. Some 200 accounts were heard allocated, with 65% going to fund managers, 10% to retail, 5% to hedge funds, 7% to insurance companies, and the rest other investor types. The bond carries risk of coupon deferral or principal write-down. Coupons on the instrument will be deferred, cumulatively, if the bank’s core tier 1 ratio breaches 7% of risk weighted assets (RWAs). The instrument will take a partial principal write-down if the bank’s capital falls below 4.5% of RWAs, according to Moody’s. Deutsche Bank, Morgan Stanley and Santander managed the deal, rated Ba1/BB/BB+, below the bank’s Baa1/BBB/BBB+ senior rating. Santander Mexico is aiming to have a Tier 1 capital ratio of at least 12% and a Tier 2 capital ratio of approximately 2.5%.
Category: Regions
Cabei Preps for Possible Upgrade
Moody’s has placed the Central American Bank for Economic Integration’s (Cabei) A2 rating on review for a possible upgrade, it says. The key driver is the adoption of a new methodology for rating multilateral development banks. Accompanying the new methodology is a scorecard that serves as a reference tool to approximate entities’ credit profiles. For Cabei, the scorecard’s three-notch indicated rating range is between Aa1 and Aa3.
Daimler Mexico Eyes January Sale
Daimler Mexico is planning to issue up to MXP2.5bn ($192m) in 5-year floating-rate domestic bonds in January, according to people familiar with the issuer’s plans. It originally had targeted November pricing. Banamex, HSBC and Scotiabank are managing the auto manufacturer’s sale, rated AAA on a national scale. Daimler last came to market in November 2012, when it priced a MXP1bn 2015 bond at TIIE+35bp.
OHL Mexico Concession Lands Coupon Inside 6%
OHL Mexico’s Concesionaria Mexiquense (Conmex) road concession unit got a 5.95% coupon on its MXP8.24bn-equivaqlent ($636m) 2035 UDI-denominated bond, according to a report from Fitch. The MXP18.78bn-equivalent private placement also included a second MXP10.54bn-equivalent 2046 zero-coupon UDI-denominated tranche. Both tranches were sold at unspecified discounts that resulted in total proceeds of MXP13.52bn, according to Fitch. The bonds amortize monthly and the tranches have respective weighted average lives of 19 and 28 years. Proceeds will be used to refinance existing debt. Goldman Sachs managed the 144a/RegS international private placement, rated BBB/BBB. Goldman also provided Conmex with a MXP6.47bn loan due 2027 that pays TIIE+210bp through 2017, and 350bp after, according to Fitch. Conmex is an indirect wholly-owned subsidiary of OHL Mexico, and is its largest asset in terms of kilometers, toll revenue and Ebitda generation. It operates the 155km Mexico City Beltway under a 30-year concession.
SanMex Sets Target for Novel T2
Santander Mexico is out with mid-6% initial price talk on what would be LatAm’s first Basel III-compliant Tier 2 bond, according to people familiar with the matter. Books opened Tuesday with pricing expected as soon as today. The Mexican bank is targeting an issue of $1bn in the 10-year bond that carries risk of coupon deferral or principal write-down. Coupons on the instrument will be deferred, cumulatively, if the bank’s core tier one ratio breaches 7% of risk weighted assets (RWAs). The instrument will take a partial principal write-down if the bank’s capital falls below 4.5% of RWAs, according to Moody’s. The deal, which could set a precedent for additional sales of Tier 2 debt in the region, is 75% underwritten by the parent company. Deutsche Bank, Morgan Stanley and Santander are managing the deal, rated Ba1/BB/BB+, below the bank’s Baa1/BBB/BBB+ senior rating. Santander Mexico is aiming to have a Tier 1 capital ratio of at least 12% and a Tier 2 capital ratio of approximately 2.5%. In November 2012, Santander Mexico debuted in the international market with a $1bn senior unsecured bond, getting $4.3bn in demand and a 4.351% yield, or UST+260bp.
Aval Opens Follow-on
Colombia’s Grupo Aval has opened the subscription period for an equity follow-on targeting COP2.41trn ($1.25bn), according to regulatory documents. The financial group is offering 1.86bn common shares at COP1,300 each through January 9. Existing holders will be allowed to subscribe 0.14 shares per share held, and are expected to make up a large part of the sale. This is seen as driving the issuer’s choice to not use the SEC process for which it registered earlier this year, and opt for a more easily completed domestic deal, in which the issuer has better control over price. Corficolombiana is leading the transaction, joined by Casa de Bolsa, BTG Pactual, Citi, Credicorp, LarrainVial and Serfinco. Aval is funding a busy M&A agenda, having completed in April the purchase of BBVA’s Horizonte Colombian pension operation for $530m, and is working on closing the $411m purchase of Guatemala’s Reformador and the $646m purchase of BBVA Panama. Separately, Aval’s Banco de Bogota subsidiary is scheduled to close the books Wednesday on a COP1.0trn follow-on of its own. Aval is expected to use some of its proceeds to replace funds used to subscribe to the Banco de Bogota transaction.
Pemex Revolver Draws 20-plus
Pemex has closed a $1.25bn 3-year revolver, with 16 banks joining the six leads, according to people familiar with the terms. Bookrunners Citi, Credit Agricole, HSBC, Mizuho, Natixis and Sumitomo Mitsui added Bank of Tokyo-Mitsubishi, Bank of America, Banorte, Barclays, BBVA Bancomer, BNP Paribas, Export Development Canada, JPMorgan, Societe Generale and Scotia at the MLA tier. Deutsche Bank is lead manager and Bank of New York, Credit Suisse, Goldman Sachs, Morgan Stanley and Santander are in at the manager level. Final allocations ranged from $43m-$69m, with the Mexican oil producer heard having to cut back as much as 40% from the initial ticket size targets due to a large oversubscription. The loan pays Libor+80bp, with 29bp commitment fees. MLAs were offered 60bp fees, lead managers 50bp and managers 40bp. Pemex is using proceeds to refinance a similar facility that was due in November.
Road Operator Completes International Placement
OHL Mexico’s Concesionaria Mexiquense (Conmex) road concession has priced MXP18.78bn-equivalent ($1.45bn) in inflation-linked international bonds through a private placement, OHL Mexico says. The toll road operator has sold MXP8.24bn-equivaqlent in 2035 UDI-denominated bonds, and MXP10.54bn-equivalent in 2046 zero-coupon UDI-denominated bonds. The zero-coupon tranche was to priced at a “discount,” though no additional pricing info was disclosed. The issuer and its bankers declined to comment or were not available for additional comment. The tranches have weighted average lives of 19 and 28 years, respectively. Proceeds will be used to refinance existing debt. Goldman Sachs managed the 144a/RegS transaction, rated BBB/BBB. Goldman has also provided Conmex with a loan facility of up to MXP6.47bn. Conmex is an indirect wholly-owned subsidiary of OHL Mexico, and is its largest asset in terms of kilometers, toll revenue and Ebitda generation. It operates the 155km Mexico City Beltway under a 30-year concession.
Harvest Exits Venezuela
Harvest Natural Resources has agreed to sell its 32% Venezuela’s Petrodelta in Venezuela to Argentina’s Petroandina for a total of $400m, it says. In the two-step deal concluding exclusive negotiation that started last month, Harvest is to sell its 80% interest in Harvest-Vinccler Dutch Holding (HVDH). Harvest would sell 29% of HVDH immediately for $125m, and sell the remaining 51% for $275m during 1Q2014. Proceeds of $330m will be used to pay Harvest’s long-term debt with the remaining proceeds used for working capital. The deal is expected to close by mid-year 2014. Bank of America Merrill Lynch advised Harvest.
Vene Dropped Again
Venezuela has seen another rating downgrade, this time to Caa1 from B2 by Moody’s. “Venezuela is facing increasingly unsustainable macroeconomic imbalances, including a skyrocketing inflation and a sharp depreciation of the parallel exchange rate. As government policies have exacerbated these problems, the risk of an economic and financial collapse has greatly increased,” the agency says. Inflation is “out of control” at more than 50%, and the parallel exchange rate has reached, 64 VEB/USD, or 10 times the official rate. Sovereign yields have reached more than 15% in early December from less than 10% in mid-May, suggesting the country’s ability to access markets has been “severely curtailed.” The outlook is negative. The move follows an S&P downgrade last week to B minus.