Bimbo Cooks up Jumbo Peso Financing

Mexican bread and confectionary maker Grupo Bimbo has secured some $2.3bn in loans from a group of 6 banks to pay for its acquisition of Weston’s US bread assets. The company is understood to be seeking to raise some two thirds of the longer-dated portions of the financing in pesos, and has accordingly tapped a lending group that has peso-lending capabilities, say people familiar with the process. The deal has multiple tranches, including a $600m 1-year bridge loan heard starting at around Libor plus 175bp. In the longer-dated tranches, Bimbo is looking at raising $900m worth of 3-year funds at Libor or TIIE plus 250bp, and $800m worth of 5-year funds at Libor or TIIE plus 300bp. Bank of America, BBVA Bancomer, Banamex Citi, ING, HSBC and Santander have agreed to equal size tickets on the deal, and will look to syndicate the loan in early 2009, says an executive involved in the process. Syndicating a large peso-denominated loan may prove to be a challenge not only because of tight liquidity conditions, but because the last large syndication in this market, a MXP37bn project loan for Farac, left some lenders holding larger than expected tickets for longer than expected time periods. The deal strained the limits local currency lending and soured relations between some participants, the deal’s leads and the borrower. Still, scoring a sizable financing package, part of which is to be denominated in pesos, is a notable feat for Bimbo in such a stringent environment. It shows that large M&A deals with a compelling story and strong banking relationships are still feasible in today’s tough market.