Category: Regions

Mexico’s State of Nuevo Leon is expected to sign a MXP1.5bn loan from Banco del Bajio and a MXP1.0bn facility with Banco Afirme, according to Moody’s, which assigns ratings of Baa1/Aa1.mx to both. The loans are payable through the same trust, using Invex as trustee, to which the state has pledged 5% of its future federal participation revenues, 3% for Bajio and 2% for Afirme, the agency adds. Both loans have a maturity of 15 years and are priced basis 28-day TIIE. Reserve funds provide 3x debt service coverage over the life of the loans. Under a Moody’s base case scenario (nominal annual growth in transfers of 4%, using 2009 as a base year, and a TIIE of 10% over the life loan), cashflows are projected to provide 2x debt service coverage for the Bajio loan and 1.5x for Afirme at the lowest point over the life of the loans. The state of Nuevo Leon is rated Baa3/Aa3.mx with negative outlook.

Grupo House aims to be the latest Mexican issuer to take advantage of regulatory changes making it easier for smaller companies to list on the Bolsa. The restaurant operator estimates a MXP400m IPO, through the sale of 50m shares, plus a possible 7m overallotment, in a MXP7.00-MXP9.00 range. House has not set a date for the transaction, and has hired Bank of America Merrill Lynch to manage. The issuer had Ebitda of MXP39m in 2009 and MXP52m in 2008, according to filings. It plans to use proceeds from the IPO to repay MXP195m in bank debt with Banco Invex, and the remainder for investing in its business plan. House operates 97 restaurants under the Arrachera House, Taqueria House and Sixties brands. It had planned to raise funds through the CCD market last year, but is among the many smaller issuers changing tack now that there is easier access to institutional investment via the Bolsa.

It is likely that Mexico’s Grupo Bimbo is paying between $75m-$125m for local candy company Dulces Vero, says Mexico-based equities analyst Eduardo Estrada of Citi. He believes the acquisition is accretive, as there are clear synergies in terms of scale and the use of its distribution network, but says impact on valuation is only marginal and could imply a 2% increase in revenue. Bimbo, the second largest confectionary company in Mexico, had MXP55.4bn in revenues in 2009.

The assassination of Rodolfo Torre Cantu, a popular PRI candidate for governor of Tamaulipas State, highlights rising political risk in Mexico. “Markets are likely to remain jittery on concerns that further violence could ensue,” says RBC, noting a slight weakening in MXP, which underperformed other EM currencies Monday. The incident represents “the clearest attack on the political process since crime became a focal point for markets in early 2009,” says Barclays. The bank says violence could intensify as the federal government is forced to strike back, and says headlines are unlikely to get any better. However, Barclays continues to believe that there is not a threat to the political regime. “Although we do not expect any resultant escalation of violence to produce a lasting repricing of Mexico’s risky assets, we think headline risk could keep them under pressure and, in particular, limit the peso’s upside potential,” says Barclays. Mexicans go to the polls Sunday to elect governors in 12 states.

Kansas City Southern de Mexico is expected to launch this week or next syndication for a $100m 3-year revolving credit facility through Bank of America Merrill Lynch and Scotia. The deal should close late July/early August and will not grow, says a person close to the process. Proceeds will support liquidity needs in Mexico.

Chilean metals producer Molymet is considering raising up to MXP1.3bn in 5-year bonds in Mexico’s domestic market, according to regulatory documents. The processor of molybdenum and rhenium with operations in Mexico is looking to raise funds for projects and to repay debt. Banamex and Scotia have been hired to lead. In October, Molymet became the second-ever foreign bond issuer in Mexico, with MXP700m in 2011 notes priced at TIIE plus 205bp. Molymet is rated AA/AA+ on a national scale.