Category: Regions

Mexico’s Nexxus is close to wrapping up a Certificado de Capital de Desarollo deal with local investors. The close should be today or early next week, Luis Alberto Harvey, partner at Nexxus, tells LatinFinance. The total value of the 10-year deal is still in flux, though Harvey says it should be between MXP2bn-MXP3bn. The CCD is linked to a fund targeting a wide variety of Mexican assets. BofA-Merrill Lynch and Santander are managing the deal.

Mexican concession operator Grupo R has raised $270m in senior secured bonds via its RDS shipping vehicle. The 11.875% bonds priced at 97.131 to yield 12.500%. Because of the discount, the company opted to increase deal size by $10m from a planned $260m in order to secure sufficient net proceeds to cover the cost of operating a 5-year Pemex drilling contract. The notes are senior secured but are subordinated to a first-lien $225m 5-year bank facility. Some $170m in equity stands between creditors and bonds. The notes priced Wednesday and by late Thursday were already trading up around 3 points, hovering around par, say executives on the deal. The book for the B3/B minus deal was subscribed by more than 3x, they add. Grupo R is said to have been satisfied with the yield at reoffer, though the aftermarket performance suggests it may have been able to squeeze more out of a buyside that is seemingly enthusiastic about the issue. Market conditions have been challenging, with issuers seeking to avoid new launches. In the case of Grupo R, the deal has had to adhere to a tight issuance schedule because the concessionaire must have the funds on hand to pay for a new ship being built for the 5-year concession, which is scheduled to be delivered in March. Jefferies led the transaction.

Mexico’s CFE is planning to sell a 10-year local issue for up to MXP5bn, CFO Francisco Santoyo tells LatinFinance. A deal is likely within the next 60 days. The utility follows fellow state-owned issuer Pemex, which sold MXP15bn in fixed and floating-rate notes at the beginning of the month, in attempting to reopen local markets. CFE is rated AAA on a national scale. Its last issue was in August, raising MXP1.47bn in MXP-denominated 2019 bonds at a fixed 8.85%, and MXP1.95bn-equivalent in UDI-denominated 2019s at 4.60%, through Bancomer and Banamex.

Santander and Inbursa have joined Banamex as bookrunners on a domestic bond from America Movil, which was roadshowing this week. The issuer has the option of placing up to MXP15bn using a combination of 5-year floaters, 10-year fixed-rate bonds, and 15-year UDI-denominated bonds. Investors expect pricing at TIIE plus 50bp-80bp for the floating tranche and 75bp-100bp over the Mbono for the fixed portion. The UDI deal is expected to be privately placed with a handful of investors. Other AAA issuers are interested in getting a similar tenor, but local bankers say the investor appetite will be limited. Banamex is the lead on the transaction. The 3-part sale will be followed by a dollar issue this year, after roadshows in Q2.

Mexican restaurant operator Alsea is preparing a 3-year local bond, likely MXP400m in size. The issuer is targeting March 17 to issue, according to regulatory documents, and expects to price the floating-rate bond at about TIIE plus 170bp, according to a banker on the deal. Proceeds will repay bank debt. HSBC is managing the sale, the second from a MXP700m shelf, and rated on a national scale. HR rates Alsea AA.

Investors, bankers and issuers are optimistic about Mexican markets in 2010, although there are plenty of hurdles. The economy is widely expected to rebound and grow by at least 4%, and there is hope that local capital markets will follow. “From a fundamental perspective, I see the cyclical rebound to be fairly positive,” says Lupin Raman VP of EM at Pimco, which has $1trn under management. Debt dynamics are “fairly favorable” relative to other EM credits, and the investor notes that Mexico remains a good strategic allocation in an international portfolio. “Mexican local rates are favorable relative to other markets,” says Raman, who also sees value in the currency. The country’s DCM shows limited signs of life, though it remains to be seen if it will take names that are lower quality than Pemex or America Movil, and if investors and issuers can agree on covenants. “We see growth in the near future,” says Ricardo Cano, head of DCM at BBVA Bancomer. He notes that the market has calmed since 2009 and gone back to basics. He expects 2010 to be similar to 2009 in terms of volume, though still from only a handful of issuers. Leonardo Pin, CIO at MetLife Mexico, also predicts a rebound in DCM activity, noting that investors are liquid. As for covenants, he says Afores have raised awareness of what they want to see from corporate debt issuers, and it is up to the individual funds to do their own analyses. The emergence of Certificados de Capital de Desarollo (CCD) gives investors more options, though Sergio Mendez, CIO at Afore XXI expects at most only a third of the roughly 30 in the pipeline to be good enough quality to get done. Plenty of risks remain. Raman notes the main concerns are a double dip in the US, and political risks, including challenges to reforms and events in the political cycle that may result in fiscal slippage ahead of the elections. “There is hope for some reform in the long term, but this year it will be difficult,” says Pin. All spoke on panels at

Fitch expects a continued increase in delinquencies within most of the UDI-denominated transactions originated by Mexican Sofoles, although a rebound in the economy and employment, an increase in collections efforts and a successful loan modification program on selected loans would allow for the potential for stabilization during the second half of 2010. Already in February Fitch had downgraded the ratings of 10 tranches and reaffirmed 2 ratings. All of these tranches were related to transactions backed by UDI mortgages originated by Sofoles/Sofomes, the ratings agency says. Fitch anticipates further negative rating actions on transactions that have experienced a significant deterioration in credit enhancement due to asset performance, particularly those serviced by financial entities with below-average servicer ratings.