Mexico Clinches JBIC-Less Samurai

Mexico became the first BBB rated borrower to issue a Samurai bond without JBIC support, placing JPY80bn ($1bn) in 3-year and 5-year bonds in the Japanese market. The deal follows nearly two weeks efforts in Japan and comes nearly a year after sounding out Japanese investors in August 2011. The sovereign priced JPY50bn in 2015 bonds at par with a 1.29% coupon, to yield Yen Libor+89bp, and JPY30bn in 2017s at par with a 1.56% coupon, to yield Yen Libor+110bp. Each part landed at the tight end of price thoughts of Yen Libor+80bp-100bp for the 2015 and 100bp for the 2013. Issuance without JBIC support came at a price, with bankers away from the deal estimating at least 100bp over its dollar curve. “They must have gotten good demand from Yen investors because it came at a good spread over its dollar curve and there are definitely investors out there to put Yen to work,” notes a rival banker following the trade. Mexico initially had its eye on JPY40bn-JPY50bn in a 5-year or 10-year, but indicated it would be flexible on size and tenor depending on risk appetite among Japanese investors. It has until now sought longer maturities but with the aid of a JBIC guarantee, most recently selling JPY150bn in of 10-year bonds at a 1.51% yield, or Yen Libor+50bp, in October 2010. Falling into Mexico’s medium to long-term investment program, Japanese investors represent an increasingly important market and diversification alternative, after the USD and EUR bond markets. Juan Pablo Newman, Mexico’s general director of debt issuance, told LatinFinance earlier this month that higher costs are generally associated with entering new markets, but funding costs were expected to decrease over time. Citigroup, Mitsubishi UFJ Morgan Stanley, Nomura and SMBC Nikko managed the deal.