Santander México breaks cross-border ice with five-year bonds

Santander México sold $1.75 billion worth of five-year bonds on Tuesday in the first cross-border bond deal by a corporate issuer from Latin America in more than a month, sources involved in the transaction told LatinFinance.

Working with JPMorgan, Morgan Stanley and Santander as the bookrunners, Santander México priced the bonds at par with a coupon of 5.375% after receiving around $6 billion in orders, one source said.

The bank had put the initial price talk in the 6% range, before putting the guidance at 5.5% and launching the offer at 5.375%, a second sources confirmed.

The debt, which Santander México will use for general corporate purposes, comes due on April, 27, 2025. Moody’s assigned the new notes an A3 rating, while Fitch Ratings gave them a BBB+.

Santander México, one of the largest banks in the country, has dollar-denominated notes with a coupon of 4.125% that mature in 2022. As the new notes came to market, the 2022s rose 2.5 points in price to bid 102.625, yielding 3.05%, according to pricing data from MarketAxxess via Refinitiv.

The bank’s longer-dated 2028 5.95% floating-rate notes rose 2.125 points in price to bid at 95.75, yielding 7.36%, according to Refinitiv.

Before the coronavirus pandemic effectively closed the cross-border bond market for corporate issuers from Latin America, Mexico’s state-owned utility company CFE sold $900 million worth of 30-year notes with a 4.05% coupon in a transaction listed in Taipei and Luxembourg on March 4.

On March 3 in New York, Chilean utility company Colbún issued $500 million in 2030 bonds with a coupon of 3.15%.

The coronavirus outbreak is pushing the global economy into recession and limiting access to the international financial markets for companies in Latin America. The International Monetary Fund (IMF), describing efforts to stem the spread of COVID-19 as The Great Lockdown, said on Tuesday it expects economic output in Latin America to contract by 5.2% in 2020 and then rebound with 3.4% growth in 2021. Overall global economic output will contract by 3% this year, but record 5.8% growth next year, the IMF said.