Mexico Adds Yen to Funding Arsenal

Mexico wants to fund more in yen after selling JPY150bn ($1.7bn) in 2019 bonds to Japanese institutional investors through its first Samurai in nearly 10 years. “We want to reestablish our presence in the Japanese market,” says Gerardo Rodriguez, Mexico’s deputy undersecretary for public credit. “We are looking forward to consolidation of more benign conditions that would allow us to issue in the yen market on a non-guaranteed basis,” he tells LatinFinance. The sovereign used a 95% JBIC guarantee to place the bonds, which were sold at par with a 2.22% coupon, or Yen Libor plus 80bp. The enhancement was needed to pave the way to a skittish local investor base that stopped buying EM during the crisis. Rodriguez adds the sovereign is pleased with the transaction, as pricing is cheaper than the dollar curve on a swap-equivalent basis. Adding the cost of the guarantee brings pricing about equal to a dollar bond, he adds. Rodriguez stresses that it was essential to hit the yen market for not just compelling pricing, but also for size and tenor too. Proceeds will supplement borrowing done this year, and Rodriguez says Mexico still plans to raise $2bn-$3bn externally in 2010 to meet some $2.4bn in maturities. He adds that he expects a few more EM and LatAm issuers to make use of JBIC support to issue in the Samurai market, eventually followed by non-guaranteed issuance. The private placement went to “more than a handful” of Japanese institutional investors, including insurance companies, banks and mutual funds, says the issuer. Nomura Securities and Daiwa Securities SMBC managed the sale.