Fine-Tuning Market Debt

May 26, 2004

Mexico carried out a landmark global-for-global bond exchange in April. Andrés Conesa, head of public credit, says the deal saved money, improved investor relations and will help the sovereign price future bond issues more efficiently.

What did the exchange consist of? We swapped $2.3 billion of existing global bonds that mature in 2019, 2022 and 2026 and had higher coupons, dollar prices and traded wide to our curve, for $2.87 billion in new bonds. We reopened our 2014 bond, selling $793million in 10-year bonds and also the 2033, where we sold $2.06 billion of 30-year bonds. We made net present value (NPV) savings of $50 million in interest with lower coupons and dollar prices, and extended the average life of  these bonds by four years. Eliminating the higher-priced bonds means the pricing of future placements will be much more efficient What was the purpose of Mexico's latest exchange? The latest exchange is the first in a new generation of liability management. We ended the first chapter of our liability management last year when we retired the last of Mexico's Brady bonds. The next natural...

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