CFE Raises 30-Year Money at Sub 6%

Fulfilling a long-held ambition, Comision Federal de Electridad (CFE) managed to raise 30-year money Tuesday, while also locking in what was arguably a record low coupon for a Mexican bond with this tenor, at least in the quasi-sovereign and government space. UMS’s 5.75% 100-year is perhaps its closest rival on this front. Whether CFE achieved its goal of pricing inside quasi sovereign peer Pemex is certainly open to debate, but the borrower was thought satisfied with a 5.75% coupon on its new long bond. Pemex 2041s were trading as tight as 253bp over on the interpolated curve and as wide as 260bp, depending on bankers’ views and biases. A new 30-year from Pemex was seen printing anywhere between 270bp to 278bp, after including an extension and new issue premium, with bankers away from the deal conceding that CFE arguably issued flat to the state-owned oil company. As with several other issues this year, weaker underlying secondaries in anticipation of new supply left bankers arguing over new issue premiums, depending on whether they spotted levels pre or post sell-off. Either way, premiums on CFE appeared in line with the 15bp that high-grade issuers have been paying of late. “CFE was wider in expectation of a deal coming to market,” says one rival banker. “It is hard to peg. I would say anywhere between 10bp-25bp, but let’s say 17bp which seems fair.” Some argue that in a market where rates are so low, talk of new issue concessions is nothing more than a chest beating exercises in light of where CFE ultimately priced. In the end, the price sensitive issue sacrificed some size for better pricing, coming with a $750m deal at 98.330 with a 5.75% coupon to yield 5.869%, or T+275bp, tight to whispers of high 200s. For some rival bankers, the relatively modest $2.1bn book size suggests that the deal was fairly priced, and indeed the bonds were up anywhere between plus 0.25 and 0.60 in the grey market heading into pricing. It is thought that the low dollar price was also