Hauling in High-Yield Investors

Jul 1, 2002

A Sub-investment grade Mexican railroad company took advantage of an openeing in the US junk bond market to issue $180 million worth of 10-year paper.

Mexican transport company Transportación Ferroviaria Mexicana (TFM) reopened the US high yield market for Latin American companies in June when it issued $180 million in callable 10-year senior notes led by bookrunner Salomon Smith Barney. The issue carries a 12.5% coupon, offering investors a 12.75% yield-to-maturity and a spread of 770 basis points over 10-year US Treasurys, a pick-up of 500 basis points over Mexican government paper. The deal was three times oversubscribed and increased from $170 million to $180 million. High yield US investors, disenchanted with the tide of negative corporate news at home, took the opportunity to buy some rare, high-yielding Mexican corporate debt. Mario Mohar, president of TFM, says strong demand from high yield and dedicated emerging market investors enabled the company to tighten the yields on some of its outstanding bonds. "It was good for investors because of the yield," he...

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