Pemex Preps Debut GDN

Mexico’s Pemex is heard looking to pay Mbonos + 135bp-140bp on a MXP5bn ($367m) 10-year global depository note (GDN) as it tests investor appetite for a structure that has so far only been sold under a purely sovereign umbrella. The government controlled oil company is authorized to issue up to MXP10bn, but is heard preferring a size closer to $500m equivalent. GDN programs have been created for a handful of sovereigns, most notably Peru, but up until now corporate credit has not been sold under this format. The idea is to give foreign investors access to local currency markets but with 144A/RegS instruments that are Euroclearable and also pay interest and principal in US dollars. As with ADRs, the GDN structure gives holders the flexibility to move between international and local markets. Hence, Pemex’s decision to choose such a format may seem unusual given that international accounts are already large buyers of Mexico’s local sovereign paper, but for the oil company this may be an opportunity to broaden its investor base. “My guess would be investor diversification, market expansion with no incremental cost,” says a rival syndicate head. Citigroup is serving as depository bank for the local Mexican transaction, rated AAA on a local scale. Book building starts today with settlement scheduled for December 7. Pemex (Baa1/BBB/BBB) has mandated HSBC, Morgan Stanley and Santander for the GDN transaction.