Pemex sells dual-tranche bond

Pemex sells dual-tranche bond

Bonds Debt Capital Markets Corporate & Sovereign Strategy Fixed Income Mexico

Don't miss your chance to submit deals for our 2019 awards. Sign up here to receive email alerts when nominations open.

Pemex raised $4bn across a 2028 and 2048 bond sale, timing its decision after Mexico auctioned off 19 deep water blocks, of which its state-run energy company snared four.

Bank of America Merrill Lynch, BNP Paribas, Citi and SMBC started price talk in the 5.75% area on the 2028s and 6.75% area on the 2048s, DCM sources confirmed. Leads 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 $2.5bn in 2028s at 5.35% and $1.5bn in longer-dated paper at 6.35%. Bookrunners later priced the notes at par after orders topped at $19bn, sources said.

"If we look at Pemex's curve it is a good grab for investors," one fixed-income investor said, adding that more value sat with the 30-year paper. The firm's 6.5% 2027s were trading around 5.25% in last week's secondary market.

On Wednesday, Pemex won two of its four block in consortium with other firms. The auction results may have influenced Pemex's decision to issue new bonds, especially after there were no surprises from the US Federal Reserve's latest monetary policy meeting.

Also, Mexican securities largely held firm after US President Donald Trump's State of the Union address steered clear of negative rhetoric on NAFTA, giving Pemex the necessary backdrop to issue bonds.

On top of this you have more stable and higher oil prices, which aids Pemex's capital raising needs, a second-fixed income investor added. 

Baa3/BBB+/BBB+ rated Pemex will use proceeds to fund a liability management exercise, which consists of a buy back and exchange offer.

Pemex is offering to exchange its:

- $2.6bn 5.5% 2044s for new 2048s at $926.25 for every $1,000 exchanged in principal
- $3bn 5.625% 2046s for new 2048s at $927.5 for every $1,000 exchanged in principal

The energy company is also offering to buyback the notes at the same price stated above, capping it at $100m for each set of securities. The deadline for both the exchange and tender is 7 February.

Pemex is also looking to buy back a series of 2019 and 2020 notes, offering bondholders who tender by 14 February:

- $1,009 for every $1,000 in 3.125% 2019s
- $1,029 for every $1,000 in 5.5% 2019s
- $1,065 for every $1,000 in 8% 2019s. Capped at $100m
- $1,065 for every $1,000 in 6% 2020s. Capped at $100m
- $1,017 for every $1,000 in 3.5% 2020s. Capped at $200m

Bondholders, which tender after this date, but prior to 1 March will receive:

- $979 for every $1,000 in 3.125% 2019s
- $999 for every $1,000 in 5.5% 2019s
- $1,035 for every $1,000 in 8% 2019s
- $1,035 for every $1,000 in 6% 2020s
- $987 for every $1,000 in 3.5% 2020s

Last year, Pemex raised €4.25bn ($4.5bn) in a three-part euro bond sale and added $2.5bn apiece to its 6.5% 2027s and 6.75% 2047 dollar bonds. The company also went to the UK bond market, raising £450m ($591m) in 3.75% 2025 bulldog notes.