Quasi-Sovereign Bond of the Year: Pemex

Quasi-Sovereign Bond of the Year: Pemex


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Pemex has repeatedly shown a knack for making award-winning transactions. Last February the state-owned oil company also showed a knack for good timing. It raised $4 billion in a dual tranche bond sale and timed its offering just after Mexico auctioned off 19 deepwater blocks and crude oil prices topped $65 a barrel for the first time in three years.

The company, which had been absent from US capital markets for seven months, ended up printing $2.5 billion of new 10-year notes and $1.5 billion of 30-year notes just before market conditions became severely tough amid volatility in US stock markets.

Investors put in almost $26 billion in orders which allowed Pemex to successfully upsize what had initially been expected to be a $3 billion deal. The orderbook included more than 500 investors for the 10-year issues and about 400 for the 30-year tranche. It was the second largest orderbook ever for Pemex, after its $30-billion issue in December 2016.

Price talk for the largest quasi-sovereign issue in 2018 started around 5.75% on the 2028 tranche and about 6.75% for the 2048s. Bank of America Merrill Lynch, BNP Paribas, Citi and SMBC then tightened at guidance to 5.4% on the 10-year notes and 6.4% on the 30-year securities.

At launch, Pemex settled on $2.5 billion in 2028s at 5.35% and $1.5 billion in longer-dated paper at 6.35%. Bookrunners later priced the notes at par after orders topped $19 billion.

Proceeds were used to fund a buy back and a $5.6 billion bond exchange offer.

Pemex is expected to increase its investments across all energy sub-sectors, although increasing production of crude oil is a priority for President Andrés Manuel López Obrador.