Bancomer Lands Tier 2 Debt

BBVA Bancomer has raised $1bn in 2022 subordinated Tier 2 bonds, drumming up around $3.6bn in orders. Investors appeared to see value in the issuance from the Mexican bank, considered high-quality despite troubles at its Spanish parent. The A3/BBB bond priced at 99.97 with a 6.75% coupon to yield 6.75%. The bonds traded up 1.00 point in the grey Thursday afternoon, according investors. Bankers away from the deal estimate Bancomer priced 50bp-70bp wide to the yield seen on its outstanding subordinated 2021 bonds. Lead managers, however, calculate a 40bp-45bp difference once curve extension and structural differences – most notably a feature for deferrable interest and principal upon a capital ratio or Mexican regulatory event – in the new notes are taken into account. “I think the bonds are trading cheap over the medium to long-term at 70bp-100bp wide of peers from Brazil. This is mostly likely due to parent problems,” says one investor following the deal. “Despite the BBVA portion of the name, this bank is a strong credit and the only possible wrinkle we envisage is the structure, with interest and principal potentially deferrable in the case of capital ratio or Mexican regulatory events,” says Richard Segal, EM credit analyst at Jeffries. Segal notes, however, that there is a general level of confidence in the quality and transparency of Mexican banking regulation, such that the structure shouldn’t be a major risk. At least 236 accounts participated, with asset managers driving bulk of demand, followed by insurance companies, banks and some hedge fund participation. The notes rank junior to all senior debt, and pari passu with subordinated debt and to holders of common stock, according to Moody’s. Proceeds will be used to strengthen the bank’s capital structure and for general corporate purposes. BBVA, Bank of America Merrill Lynch and Goldman Sachs managed the deal, the bank’s first in the international market since March 2011.