Mexico Considers 5-Year on Standalone Samurai

Mexico is looking at a tenor in the 5-year range as it prepares to engage Japanese investors next week about the possibly of issuing a Samurai bond without a JBIC guarantee. “Since it will be the first issue in a long time from a triple B sovereign without a JBIC guarantee the sweet spot is in the 5-year range, though there are investors willing to have a longer tenor,” Alejandro Diaz de Leon, the country’s public credit head, tells LatinFinance. Size will also likely be comparatively small at around $500m equivalent, he adds. Up until now, Mexico has sought longer maturities but with the aid of a JBIC guarantee, most recently selling JPY150bn ($1.8bn) of 10-year bonds at a 1.51% yield in October. Coming out on a standalone basis is part of a natural evolution for issuers wanting to establish a permanent presence in this market. JBIC’s program was designed to support such initial approaches before issuers were ready to go out on their own, Diaz says. While investor meetings next week via Bank of Tokyo Mitsubishi, Citigroup and Nomura will provide a clearer picture of whether there is sufficient appetite for such a trade, Diaz says Mexico has proven popular among investors despite recent volatility. “Mexico is a sound credit that can provide some cushion and diversification away from markets that are more volatile,” he adds. Technical may also favor the sovereign as there has been a dearth of paper form utilities in the wake of the recent tsunami, creating a window of opportunity for a borrower like Mexico.