Category: Regions

Mexico’s Telmex has priced MXP1.6bn in 2018 bonds at 8.27%, or 64bp over the comparable government bond. The AAA deal was 1.9x oversubscribed and had been expected to price at 65bp over, according to a banker on the sale. Telmex will use proceeds for general corporate purposes, including the expansion and upgrading of its network. Inbursa and HSBC managed the sale.

Mexico’s Sare Holding is preparing to issue MXP1.5bn in 2013 bonds. The homebuilder and developer plans to use proceeds to refinance debt and for other working capital needs. The A3 locally-rated deal is anticipated in early May. BBVA is managing the sale. Sare is a homebuilder engaged in the development, construction, marketing and sale of affordable, middle income, residential and tourist housing developments in Mexico.

Mexican power utility CFE is having a very difficult time raising a $2bn loan facility, thanks to what bankers call overly ambitious pricing. The 3-year senior revolving facility, hailed as a benchmark due to its size and investment grade rating, has been in the market for 6 weeks, but little progress has been made. Just two MLAs, SocGen and Inbursa, have been confirmed so far though bookrunners claim others are slowly coming in. Bankers away from the deal say the 40bp margin offered simply does not appropriately compensate most banks, whose funding costs have risen much higher. “It’s not worth it even for the relationship,” says a banker whose shop chose not to participate. “Right now, there are so many other excellent credits out in the market that are offering much higher margins, and people are choosing those over CFE,” the banker adds. The problem is that CFE appears unwilling to flex up, feeling that 40bp is already a significant premium to its pricing during better times. Bankers on the deal say the company has resorted to dealing directly with potential lenders to reassure them of any doubts. Meanwhile, executives away from the process allege that CFE is leaning on relationship banks already on the deal to pony up more cash to get the thing done. MLA tickets of $150m come with a 35bp fee while $100m tickets pay 30bp. BBVA, RBS, BNP and Santander are bookrunners, with Citi also participating in a senior role.

Mexico’s central bank is expected by many economists to leave the policy rate unchanged at 7.50% after its meeting on Friday. “It is premature to talk about rate cuts at this juncture,” says Alberto Ramos, an analyst at Goldman Sachs. “First, because both headline and core inflation are still outside the central bank comfort zone. Second, there is no immediate need to increase the monetary stimulus to the economy in order to support activity, as the recent activity leading indicators have turned out stronger then expected,” he adds. But not everyone shares that view. In its daily report yesterday, Citi said it believes in a 25bp cut in the rate as part of a preventative measure in the face of a weakening US economy.

The Mexican state of Tamaulipas plans to sell up to MXP6bn in 2017 bonds backed by employer taxes revenues. Michoacan and Chiapas did similar transactions last year for 30 year tenors, notes a banker managing the sale, while Tamaulipas is bringing a larger amount shorter tenor that better fits its exposure profile. Proceeds will fund various public projects. Value Casa de Bolsa is managing the sale.

Capitalizing on upgrades and market opportunity, State of Mexico is wrapping up the final phase of a MXP27bn debt refinance which extends duration and slashes the price on most liabilities. The amortizing deal in 20, 25 and 30-year tranches, with roughly a third of the amount in each, has an average duration of 12.5 years. The weighted average spread is 48bp over 28-day TIIE. “Right now, we are at TIIE plus 170bp, so you can see the benefit of having a [new] bank credit,” State of Mexico’s finance secretary Luis Videgaray tells LatinFinance. The deal benefits from significant ratings upgrades – including 6 notches from Moody’s – and market improvements since the new administration took over in 2005. Structural enhancements pushed it to AA+ on the local scale. For the first time, Banobras provided a first loss guarantee, for 27% of the deal. Typically the government development bank acts as a lender. The transaction also has a pledge of federal revenue shares and was self syndicated by State of Mexico, which staged a beauty content for banks. Videgaray says he detected better pricing in the bank market than for bonds and got demand of MXP44bn for the MXP27bn deal, some of it out to 30 years. Eight banks participated in all. The final phase of the transaction is expected to close May 2 and involves long-term swaps of floating to fixed rate MXP. “Right now the swaps curve is very flat, so it makes sense,” says Videgaray.

State of Mexico’s innovative MXP27bn refinancing, several months in the making, may set a trend for indebted Mexican entities, including its innovative use of a Banobras guarantee. “Parts of the deal may be replicated, particularly the guarantee,” State of Mexico’s finance secretary Luis Videgaray tells LatinFinance. He adds that some of the transaction being wrapped up now might ultimately find its way to other markets. “The loans can be securitized, so they may end up in the bond market,” says the official. Like the sovereign, State of Mexico aims to cut net debt each year. It has gone from MXP30bn when the administration started in 2005 to MXP29bn total debt this year. Mexico is the country’s biggest state by population and revenue, says Videgaray, who is very happy with the refinancing. “We are pleasantly surprised by what we can do,” says the official.

Javer, the Mexican homebuilder, will today launch a $160m 5-year amortizing loan, say executives close to the process. Proceeds will be used to refinance debt and general corporate purposes. The facility is being led by Credit Suisse and already counts on the participation of ABN AMRO and Mexico’s Inbursa as MLAs. In July 2007, private equity firm Advent International, along with a group of minority investors, agreed to acquire the company for a reported $500m. But the buyers backed out of the deal following disagreements on price and Javer today remains a standalone entity, say bankers familiar with the company.