HY Passes Test with ICA Bond

Mexico’s ICA has raised $350m in the bond market, booking about $2.4bn in demand and demonstrating that appetite exists for LatAm high-yield credits. The sale, upsized from $300m, represents the first non-FIG corporate bond from a LatAm high-yield issuer since early May, and the first from Mexico since March. The builder and engineer priced the 2017 NC2.5 at 99.002, with a 8.375% coupon, to yield 8.625%, the tight end of 8.750%-area guidance, which followed wider 9%-area talk. The new B1/B+ bond was up 0.8- 1.0 points in the aftermarket Thursday, according to traders. Buyers were drawn in with the early 9.0% levels, seen as cheap for a 5-year, particularly considering the strong new issue market at the moment. At the much tighter final level, the bonds still appeared to be attractive. “Nobody is dropping out. People are searching for yield anywhere they can get it,” says a New York-based portfolio manager looking at the deal. The bonds compare to the 9.1%-9.3% yield seen on ICA’s outstanding 2021 bonds prior to launch, though working out a new issue premium from that level is difficult. Lead managers suggest the sale came flat to the issuer’s curve. ICA plans to use proceeds to refinance existing debt. Bank of America Merrill Lynch, Deutsche Bank and Goldman Sachs managed the sale, guaranteed by the Constructoras ICA, Controladora de Operaciones de Infraestructura and Controladora de Empresas de Vivienda units. LatAm had not seen a pure corporate high-yield bond sale since Inmet Mining’s $1.5bn 2020 and Ajecorp’s $300m 2022 in the first half of May.