Mexico Issues Bond With Action Clauses
In a landmark deal in February, Mexico
became the first sovereign to issue a global bond incorporating
innovative collective action clauses. These legal agreements
spell out the specific obligations of bond issuers and how
investors' interests would be represented in the event of a
debt restructuring process. The agreements have been the
subject of intense debate in the capital markets after
Argentina defaulted on its debt in December 2001. Mexico issued
the $1 billion, 12-year bond on February 26, in a transaction
led by Goldman Sachs and JP
Morgan. The bond, which has an annual interest rate of
6.625% and a yield-to-maturity of 6.918%. It was priced at 312
basis points over 10-year US Treasuries. The bond attracted
$1.7 billion in book orders from more than 120 institutional
investors mostly based in the US and Europe.
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