Telmex Redials Cross-Border DCM

Telmex has been lured back in to the dollar market for $500m in tightly priced 2019 bonds. The Mexican phone operator’s first dollar issue since 2005 benefited from scarcity value, investors say, despite the fact that it looks less attractive versus comps like America Movil and others more diversified into wireless. The A3/BBB+ deal came at 99.733 with a 5.500% coupon to yield 5.535%, or UST plus 200bp, in line with 200bp area guidance. The book was $1.5bn, according to bankers on the transaction. “It came a little tight, but they have very little out there,” notes a participating EM investor. It was heard trading up 0.25-0.50 points Thursday afternoon. America Movil, the closest comp, was heard trading at 180bp prior to the Telmex announcement, according to Barclays. An investor says Telefonica was trading in the 170bp area and Telecom Italia at 220bp-230bp. “We view Telmex as a solid credit, but given the continued decline in its traditional business, lack of geographic diversity, regulatory hurdles, potential for new foreign competition, and uncertainty about when or if the company will receive a TV concession, we believe it should trade at a discount to America Movil,” Barclays says, noting that it sees “little potential upside” in the new 2019s. America Movil sold its 2019s in early October with a 5.000% coupon to yield 5.105%. Bankers on the deal note a bit of widening out in high-grade since the America Movil sale, but spot it at 185bp and pin most of the difference on a new issue premium. Bank of America-Merrill Lynch and HSBC managed the transaction, whose proceeds are for general corporate purposes. Telmex has mostly been funding itself through the Mexican local markets, with its last international foray being a $450m 2010 and 2015 offering in 2005 and a MXP4.5bn global peso 2016 bond in 2006.