Credit Suisse Tips Vitro 2012 and 2017

Credit Suisse has started coverage of the bonds of Vitro, the Mexican glassmaker that has been a repeat DCM client. It puts an outperform recommendation on the new 2012 and 2017 bonds and assigns a market perform to its 2013 bond due to its call feature. “At a yield of 7.78% (the ’12s) and 8.32% (the ’17s), we believe these bonds offer an attractive yield given our relative assessment of Vitro’s risks and returns, and a particularly attractive yield among Mexican and US HY industrials,” says Credit Suisse. The US comp is Owens-Illinois. “The main risk to our recommendation on Vitro is the potential for an acquisition oriented growth strategy that could lead to higher leverage (though bond covenants allow for a maximum of 3.5x gross leverage),” the shop adds. Challenges for Vitro include high energy costs, exposure to the auto sector and increased competition. Following the recent $1bn issue, which Credit Suisse jointly led, Vitro streamlined its capital structure and eliminated structural subordination of holdco creditors, provided subsidiary guarantees to all its holdco notes, lowered financing costs and extended maturities, and reduced refinancing risk and liquidity constraints.