Sempra Mexico Sale Broadens Domestic Market

Sempra Mexico has priced a MXP5.2bn ($412m) domestic bond sale, the local market’s first transaction from a non-government energy sector issuer. The Mexican unit of US-based Sempra Energy priced in line with expectations and was thought to give domestic institutions a 10bp pickup to government-owned Pemex. A MXP1.3bn 2018 floating-rate tranche pays TIIE+30bp and a MXP3.9bn 2023 fixed-rate tranche pays 6.30%, or Mbonos+125bp. The long tranche offered 10bp premium to where a new Pemex 10-year would price in the domestic market, say people following the sale. “The deal priced at fair value,” says a Mexico City-based participating investor, noting the 2023 offered the pickup to Pemex and priced in line with his Mbono+125bp-130bp estimates. While official price talk was not disclosed, analysts away from the deal expected the floater to price at TIIE+20-25bp and the fixed at Mbono+120-125bp. Total demand topped 2.5x, driven mostly by Afores, insurance and pension funds on the fixed portion and private banking, insurance and mutual funds on the TIIE tranche. Deutsche Bank, Credit Suisse and Santander managed the transaction, rated AAA/Aaa on a national scale. In October, Sempra Mexico won a 25-year contract to build and operate a pair of gas pipelines in the state of Sonora, which should require a $1bn investment including proceeds from the bond sale, according to ratings agency reports. Sempra operates five gas pipelines and a regasification terminal in Mexico, and derives about 60% of its revenues from CFE contracts.