The re-emergence of Mexico as a favorite with investors and the
continued brisk business in the cross-border bond market were
two of the strongest themes in Latin America’s
capital markets last year. Nothing captured both of these
trends quite like September’s blockbuster $1.15
billion deal from Mexican industrial conglomerate Mexichem.
DEAL OF THE YEAR: Corporate High-Grade Bond
Mexichem $1.15bn 2022, 2042
The issuer’s return to the international debt
capital markets following a three-year absence allowed it to
raise one of the largest order books ever for a Latin American
or emerging market credit. Stirring up $17.6 billion demand, it
also achieved the lowest coupons in the 10 and 30-year space
for a split-rated LatAm corporate and chemicals-sector
For investors, the deal represented scarcity value of
Mexican corporate paper in the Ba1/BBB minus space, allowing
buyers to place a safe bet on attaining coveted full investment
"Scarcity paper out of Mexico and stories like this one are
not many on the corporate side and people liked it," says
Roberto D’Avola, head of LatAm DCM at JPMorgan, a
manager on the deal with Citi, HSBC and Morgan Stanley.
The deal also extended Mexichem’s maturity
profile at attractive funding costs as it sought to finance
existing liabilities, specifically a $350 million public tender
offer for bonds due 2019 of which $267 million, or 76.3%, of
the outstanding bondholders accepted.
First announced as a new benchmark-size 2022, with 5.50%
area initial price talk, the book quickly grew to $2.7 billion,
generating momentum into the overnight leg of the deal.
At the New York open the following day, the books had
swelled to nearly $7 billion. Leveraging the momentum generated
by the 10-year and responding to reverse inquiries, Mexichem
decided to add the longer tranche.
Robust demand allowed it to issue both tranches at sizes
larger than expected – by $50 million and $100
million, respectively. A $750 million 2022 bond priced at
99.206 with a 4.875% coupon to yield 5%, at the tight end of
5.25% guidance that followed 5.5% talk. A $400 million 2042
year tranche priced at par with a 6.75% coupon to offer a yield
at the tight end of the 7%-area initial guidance.
US investors accounted for 60%-70% of the deal, European
ones for about 20%, and Asians around 10%. The company in
October returned with a $1.21 billion equity follow-on
transaction, securing more than $4 billion demand.