Category: Regions

Mexican president Felipe Calderon has nominated finance minister Agustin Carstens to lead the central bank, replacing Guillermo Ortiz who ends a second 6-year term this year. Social development minister Ernesto Cordero will take over from Carstens. Some investors described the move as political, since Cordero is one of the closest advisors of the inner-circle of the president. “Cordero is not the best option for the FinMin post; he is a PAN loyalist with strong links to industry and will be a less effective-negotiator with congress,” says RBC. It adds that Cordero is bad for structural reform progress next year, and likely to be much more interventionist given a focus on growth, placing less emphasis on fiscal discipline/reform and the credibility/quality of growth. “His biggest challenge will be to harness the cooperative signs being sent by the leadership of the PRI to pursue structural fiscal reforms and improve the quality of the public finances in 2010,” says Goldman Sachs of the Cordero appointment. Banobras chief Alonso Garcia Tames had also been rumored in the running for the FinMin post.

Sigma Alimentos’ $250m 10-year priced wider than expected, amid indigestion from a week heavy for Mexican issuance. The food products unit of Grupo Alfa priced the 2019 to yield UST plus 374.5bp, wide to the 350bp-area guidance issued Monday. The BBB minus 2020 came at 98.059 with a 6.875% coupon to yield 7.150%. The book was about $500m, bankers on the deal say, and the bond was heard trading up 0.25-0.50 points late Wednesday afternoon. Despite putting out the guidance at the scheduled end of its roadshow Monday, the issuer held additional meetings Tuesday and waited to price until Wednesday. This may not have been the best time for the issuer, investors say, since compatriots Homex and Cemex diverted waning December investor attention with their own deals. They add that the deal’s small size may also have been seen as a drawback. A banker on the deal notes that determining pricing was challenging, with EM investors seeking higher yield than high-grade accounts, who saw a pickup to US comps even in the low 7s. Approximately 80% of the book was high-grade dedicated accounts, the banker says. Deutsche Bank and Santander managed the sale. The company plans to spend proceeds on refinancing existing debt.

Cemex has priced a tighter than expected issue of $1.25bn and EUR350m in bonds. The fallen Mexican cement maker generated orders of about $8.0bn and EUR1.5bn, as investors showed faith in its plan for recovery, say bankers on the deal. “It’s a case of investors feeling there are still investment-grade fundamentals at the company,” Bevan Rosenbloom, LatAm corporate debt analyst at RBS, tells LatinFinance. As the book swelled, Cemex revised guidance Wednesday morning to 9.500% area from 9.750% area in USD and 9.625% area from 9.875% area in EUR. It grew the USD piece by $250m and the euro tranche $50m, versus initial size indications. The B/B+ 2016 NC4 in dollars priced at par to yield 9.50%, or UST plus 660.3bp. The B/B+ 2017 NC4 euro piece meanwhile came at par with a 9.625% coupon. There was some pop in the aftermarket, with the dollar bond up 2 points late Wednesday afternoon, according to investors. “Execution was good. They started talk at the right level,” says a banker away from the trade. Investors say they expect the erstwhile blue chip back in the market soon in 2010 if conditions remain attractive versus Cemex’s renegotiated bank debt. Some buyers saw the new issue as preferable to existing paper, particularly perpetuals. “When they were investment grade, the [perpetuals’] change dates were call dates, but not necessarily now,” says a US West Coast based investor who holds the bonds. “The step-ups are actually a step down,” as long as Libor remains low, he adds. Citi, was global coordinator on the USD piece, with BofA-Merrill, Barclays and JPMorgan as bookrunners. Citi, BNP and RBS ran the euro sale. The transaction though Cemex Finance is guaranteed by the parent, as well as several units including the Mexican, US, and Spanish operating companies. Proceeds are for debt refinance and general corporate purposes. The deal is part of Cemex’s attempt to reduce interest expense following a $15bn bank debt restructuring concluded in August that imposes a strict

Mexico’s finance ministry says it has established a new oil revenue hedging program for 2010 at $57 a barrel after having received $5bn from a 2009 program, which guaranteed revenues from oil exports at $70 per barrel. In 2010, the government will hedge 230m barrels of oil, or according to Goldman Sachs, 57% of projected exports. The shop sees the new program as positive, since the 2009 hedge gave the government considerable budgetary leeway for countercyclical fiscal policy, despite the large drop in non-oil revenue. For 2010, Goldman forecasts WTI oil prices will end at $92.50 a barrel, which translates into $78.60 a barrel.

Mexico’s Sigma Alimentos is expected to launch and price a $250m 10-year bond today. The food products unit of Grupo Alfa gave 350bp area guidance Monday, but was heard still wrapping up investor meetings Tuesday. Pricing Mexican deals is tricky this week, investors note, given the large offer from Cemex expected today, and $250m from Homex sold yesterday. Deutsche Bank and Santander are managing the sale, rated BBB minus. Sigma plans to use proceeds to refinance debt.

Homex has sold $250m in 2019 bonds, becoming the third Mexican Homebuilder this year to take advantage of high-yield appetite. The Ba3 /BB minus rated issuer priced at 98.426 with a 9.500% coupon to yield 9.750%, or UST plus 635.9bp. The yield was bang on 9.75% area guidance, and in line with investor expectations. The bond was heard trading near flat late Tuesday afternoon. The order book reached $500m, according to bankers on the deal. Fellow homebuilder Geo’s (also Ba3 /BB minus) $250m 5-year bond had received $750m-$1bn in orders in September. Though Homex priced within expectations, investors note some concern about oversupply from Mexican issuers this week, especially as Cemex preps a likely $1.0bn-$1.5bn for today. “The timing may not be perfect. Combined issuance could start to weigh on Mexican issuers,” says a New York-based EM investor. She adds that Homex is a solid credit and the bond priced appropriately. The problem, she explains, may come from oversupply from Mexican high-yield, particularly compared to Brazilian issuance, which may have tapered off. BBB minus rated Sigma Alimentos was also expected to price today. Credit Suisse and HSBC managed the Homex sale. With the $243m in proceeds, the issuer plans to repay about $180m in indebtedness, and use the remainder to fund operations, including a debut project in Brazil, initiated earlier this year. The bond was Homex’s first since a 7.5% of 2015 sold in 2005, also through Credit Suisse and HSBC.