Scribe Pens Junk Bond Hit

Mexican paper products maker Grupo Papelero Scribe has sold $300m in 10-year bonds at par to yield 8.875%, well through initial investor expectations. The first-time issuer rewrote a $250m deal expected by investors to land in the high 9s into a $300m 2020 NC5 yielding 100bp tighter, apparently through good marketing. “They made a credible case for themselves,” says a West Coast-based bond investor who attended the roadshow. The investor notes that there is not much LatAm paper out there offering such attractive yield. The bond landed well inside 9.125% area guidance and initial talk of low-to-mid 9s. It was heard trading up about 0.5 points Tuesday afternoon. The transaction received $900m in orders and went to about 100 accounts, according to a banker on it. Investors warmed to Scribe, liking its market position and the room it has to improve credit metrics. However, there are some buyside concerns about dividends paid to 25% owner Kimberly Clark that outrank the senior bonds, and possible vulnerability to pulp price shifts. Proceeds are set to repay $262.6m of a term loan facility, and $34m to cover an obligation to Kimberly Clark. Credit Suisse was sole bookrunner on the Ba3/BB minus 144a/Reg S bond, with Morgan Stanley as co-manager. Kimberly Clark sold its Mexican paper business, known as Pimsa, in 2006. Pimsa attempted unsuccessfully to raise $320m in the dollar bond markets that same year, before eventually expanding and becoming Grupo Scribe. After an active 2 weeks, LatAm DCM appears headed for an Easter break, with only Santander Brasil and ABC left to tap this week. Bankers claim to have more Mexican high yield in the pipe for April. Investors are lapping up corporate credit that appears cheap, especially versus Brazil comparables.