Pemex Drills Local Market

Pemex generated hefty demand for an eagerly awaited MXP10bn sale of local bonds, pumping new life into Mexico’s ailing domestic capital markets. “This could be something of a water-parting issue for the market,” says Judith Verdejo, director of debt analysis at Ixe, speaking of the oil play’s first local issue in almost 3 years. “The hope is that with positive macroeconomic news, stability can return and [domestic bond] spreads might be able to come down a bit,” she adds. The state-owned oil company priced MXP6bn in 2012 bonds at TIIE plus 100bp and MXP4bn in 2016 bonds at a fixed 9.15%, or Mbonos plus 150bp. The sale saw demand of MXP24.7bn, according to bankers on it. Buyers were mostly Mexican institutional investors. “This is positive, there is a new benchmark. I hope this is not an isolated incident only for a name like Pemex,” says a Mexico City DCM banker away from the deal. He adds that sentiment in the domestic market has been ticking higher in recent weeks. At its last domestic placement in 2006, Pemex sold MXP10bn in 8-year notes paying TIIE minus 7bp, according to Dealogic. The issue was aided by the government’s announcement Wednesday that it will ask for a $47bn credit line from the IMF and activate a $30bn swap line with the US Fed, which fueled a rally in local markets. Pemex Tuesday indicated a MXP10bn maximum size for the issue and was not surprised that it was reached, given a recent supply drought and the fact Pemex had not issued locally for a long time, says a banker on the deal. The issue, rated AAA on a national scale, is the first from a 5-year MXP70bn shelf filed this year. Citi, HSBC and Santander managed the sale, which follows a local roadshow. Proceeds will go to fund Pemex’s investment needs. CFO Esteban Levin has said Pemex plans to sell $2bn-$3bn equivalent of bonds in the domestic market this year. Bankers, investors and other corporates hope the Pemex local trade will help establish price benchmarks and facilitate more peso issuanc