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Mexican high-yield issuers test waters

Sep 4, 2013

Mexican high-yield borrowers are preparing to sell bonds, and not waiting for investment-grade issuers to re-open the market first.

The increased attention being paid to Mexican assets this year has lured a few lower rated bond issuers to the market looking to get cheap funds before US policymakers raise rates. Office Depot Mexico (BB+) is meeting investors this week and next, ahead of a $350 million offering. Grupo Gigante is in the process of taking full control of Office Depot Mexico, and is looking to replace bridge financing.

TV Azteca is also considering accessing the market, for what would be its first international bond since 2011.

Pemex contractor Oceanografia is meeting buyers ahead of what would be its first DCM sale since 2008. Its existing 2015 bonds are rated B+. It joins BB/BB Offshore Drilling Holdings, Grupo R's parent, which is on the road to market a likely $955 million bond. The pair are hoping to capture optimism surrounding the Mexican government's plans to reorganize Pemex, which has bankers predicting many more bond deals from issuers in the government monopoly's supply chain.

Though the energy reform proposal has been welcomed by the markets, Mexcio's macroeconomic numbers have been disappointing. Indicators in the second quarter were much weaker than expected, Itaú says, noting that initial activity indicators for the third quarter such as manufacturing and employment data do not yet indicate an economic rebound. The bank sees 1.3% GDP growth this year, and 3.6% next year.  

Office Depot Mexico and others are readying deals without waiting for investment grade borrowers to open up the markets, though some higher rated borrowers have indicated fundraising plans. In the investment-grade oil space, Colombia's Ecopetrol is meeting investors this week ahead of what could be the state-controlled firm's second-ever international bond issuance.

Despite a closing of the cross-border markets earlier this year when widening treasury levels spooked issuers, volume is higher this year than last year. Boosted by América Móvil's $2.77 billion European hybrid offering this week, LatAm issuers have sold $102.1 billion from 270 transactions through September 4, according to Dealogic, when both domestic and cross-border issuance is considered. This compares to $100.6 billion from 263 deals in the corresponding period in 2012. LF


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