Nemak to Refinance Bank Debt

Mexican car parts manufacturer Tendedora Nemak has launched a $1bn 5-year amortizing loan as it looks to refinance its entire stock of bank debt and better position itself to take advantage of growth in the auto sector. The company launched the loan last week in Mexico and New York via leads BBVA, HSBC, Citi and Santander. Nemak is also renegotiating terms on local bonds to release collateral, according to one banker. The loan is tied to a leverage grid and is offering L+300bp for leverage over 3x, +275bp for 2.5x-3x, +250bp for 2x-2.5x and +225bp. The company is expected to pay the higher end of such spreads as its leverage is still in the 3x plus range. Upfront fees are 50bp for $50m tickets and 30bp for $25m tickets. Pricing is considered aggressive for a company that struggled when the US economy slid into a recession, but given that it is part of the Alfa group, bankers are likely to be more forgiving. In May Fitch upgraded the credit’s long-term local rating to BBB (mex) from BB+ (mex), citing its improving financial situation. Nemak’s local 2017 bonds, which have a partial guarantee from Bancomext, were also upgraded, to A minus from BBB. Debt -to-Ebitda at the end of Q1 2011 was 3.6x, compared to 3.4x in 2010 and 5.5x in 2009, adds Fitch. Ebitda for 2010 was $364m, which was a 40% increase over 2009. The rating action also took in to account the company’s growing market share and the recovery of the car manufacturing industry.