Femsa €1bn bond

Mexican beverage and retail company Femsa is a regular issuer in the cross-border bond market, and this year it took its first leap into the euro bond market, tapping a new investor base with a €1 billion note.

Femsa faced stiff competition for this award from América Móvil. The Mexican telco was the first Latin American corporate since June 2015 to issue in euros. However, Femsa’s deal represented the company’s debut in euros and garnered the lowest-ever coupon for a seven-year euro trade from a Latin American corporate issuer.

Investor appetite for emerging market debt, in particular from LatAm, was high throughout most of 2016. But Femsa was nonetheless strategic in its timing. 

“We came in the first quarter of the year to avoid the market rush and speculation,” says corporate treasurer José Olguin. LatAm issuers frequently tap US investors but Femsa’s choice reflected strong demand from a “solid” investor base in Europe, he adds.

A roadshow in Europe as well as Femsa’s 20% ownership of Dutch brewer Heineken helped drive interest in the transaction. Some 230 accounts placed orders for the deal, facilitating the tight pricing. 

Lead managers opened books with initial price talks in the 175 basis point area over mid-swaps, before tightening at guidance to 160 basis points. The orderbook topped €2.7 billion, with demand coming mainly from asset managers in Germany, the UK and France. The deal was ultimately priced at 155 basis points over, to yield 1.82% with a 1.75% coupon. 

The deal improves the single-A rated borrower’s cost of debt and increases its financial flexibility, says Olguin. LF

Size: €1bn 

Date: March 2016

Supporting banks: BBVA, Credit Suisse, Deutsche Bank, BNY Mellon

Supporting law firms: Cleary Gottlieb, Ritch Mueller, Skadden Arps