Mexico's Bancomext looks to dollar, euro bond markets

Mexico's Bancomext looks to dollar, euro bond markets

Mexico Bonds

Bancomext is monitoring market conditions in both the dollar and euro bond markets ahead of potential bond sales next year, CEO Alejandro Díaz de León told LatinFinance.

The Mexican export credit agency will likely target a cross-border issue between $500m and $800m, although going up to $1bn is not out of the question, he said.

"Depending on the tenors and cross-currency swaps, we expect the dollar and euro markets to be closer to our needs," he said. "In euros, the rates remain attractive, but we will monitor the swap levels."

Bancomext’s balance sheet is denominated roughly two-thirds in foreign currencies, while its capital base remains in Mexican pesos, Díaz de León said. This presents a challenge to the export credit agency to maintain its capital ratio levels, particularly if foreign exchange rates remain volatile.

"This is why our Tier II, Basel III-compliant bond was so important," he said. "This improved our capital base from 12% to 18% and provided us with equity in foreign currency."

The ECA in August priced a $700m Basel III-compliant bond, which proved a "useful instrument" for Bancomext to mitigate its exposure to foreign currencies.

"[The Tier II bond] has given us some breathing room, and we now have the additional lending capacity of MXN60bn [$2.93bn],” Díaz de León said.

The peso has slumped since Donald Trump won the US presidential election earlier this month, but Díaz de León said Bancomext had hedged its assets with its liability positions to correspond with any volatility, adding that the ECA's balance sheet was "fully hedged."

In the local capital markets, Díaz de León said Bancomext was working on issuing a peso-denominated bond through the clearing house Euroclear but had yet to obtain the necessary documentation requirements.

"We are enthusiastic about the [Euroclear] format," he said. "We are working on it as we speak but we need the ready documentation."

The A3/A/BBB+ rated issuer raised $1bn in 2025 bonds in October 2015.