Axtel, Grupo Alfa’s newest subsidiary, was acquired late in 2015 and it wasted little time ramping up its activity in the loan market to lower its financing costs.

In February, it negotiated a dual-tranche, dual-currency syndicated transaction worth $750 million. Axtel plowed the proceeds into a bond buyback, repurchasing instruments due in 2017, 2019 and 2020, which carried rates averaging 9%.

The loan, led by Banorte, BBVA, Citi, JPMorgan and Santander, incorporated a peso and dollar tranche, and was subsequently increased to $835 million. 

Sixteen banks joined the syndication. Axtel pays 250 basis points over Libor for a $585 million five-year tranche and 225 basis points over Mexico’s TIIE rate for a $250 million-equivalent local currency portion. 

“We were able to conduct a very successful refinancing,” says Ramón Leal, chief financial officer of Grupo Alfa, which owns 51% of Axtel. “We achieved a very successful syndicated transaction that saved the company around $30 to $35 million dollars a year on interest.” 

Around $85 million of the funds raised went toward refinancing short-term debt. The fact that 40% of the credit is denominated in local currency cuts Axtel’s exchange rate risk. 

The company reported pro-forma revenues of 2.84 billion Mexican pesos ($153 million) in the first quarter, up from the 2.42 billion pesos for the same period of 2015. But ebitda has fallen sharply, standing at 359 million pesos in the first quarter, down from 1.5 billion pesos a year earlier. 

Nonetheless, Axtel was upgraded by Moody’s to Ba3 from B3 in early 2016 due to an enhanced credit profile after it bought another Alfa subsidiary, Alestra. “The merger with Alestra gives Axtel stronger margins and a lighter debt profile,” Moody’s said at the time. LF