LatinFinance - March/April 2016 - 43

international debt capital markets will be
crucial to meeting those goals.
Bancomext and Nafin both issued dollardenominated bonds late last year after a
long hiatus from the cross-border markets
to create credit curves in US dollars. The
two banks also set pricing benchmarks for
other government agencies and institutions
in Mexico and across Latin America.
"Market conditions last year were still at
historical low rates, and when we analyzed
this we saw that it made a lot of sense for
them to access the market at cheap rates
with low cost financing. They now have
more diversified funding sources with
more alternatives than they had in the
last ten years," Jorge Mendoza, Mexico's
deputy director general of debt issuance
for Mexico, tells LatinFinance. "Bancomext
and Nafin's dollar issuances are not one-off
trades."
Bancomext sold a liquid $1 billion 2025
note in October 2015 that offered investors
an attractive pickup to the Mexican
sovereign. The note sold at 237.5 basis
points over Treasuries at a cash price of
99.719 to yield 4.41% for the A3/A/ BBB+
rated issuer.
That same month, Nafin returned to
the capital markets after 18 years to issue
a benchmark $500 million 2020 green
bond, drawing heavy interest from global
accounts including those with dedicated
environmental mandates.
"Independent to Nafin's return to the
international markets and promise to
be regular issuers, we have become a
reference point for other borrowers in Peru,
Chile and Colombia," Nafin CFO Pedro
Guerra tells LatinFinance. "Investors have
also shown interest and we have opened the
door under this [green bond] format. We
are not only a reference for Mexico, but also
for Latin America."
Nafin's deal also represented the first
ever green bond out of Mexico and the
third green bond ever issued out of Latin
America.
Guerra says Nafin is considering a new
benchmark size green bond or plain vanilla
bond transaction in US dollars and other
currencies this year.
Jorge Ortiz de la Peña Muller, head of
debt capital markets of Mexico at Bank of
America Merrill-Lynch says Bancomext and
Nafin opened up the international market
for other borrowers.
"Mexican development banks have
been growing at a very fast pace and it got
to the point that they needed to access the

quality Mexican paper that represents
sovereign risk, bankers say.
"The market is excited about access
to new government credit," Jose Padilla,
Daiwa's head of capital markets Americas.
"Nations use development banks as a
fuel for growth and I haven't seen that in
Mexico for the past twenty years."
Mexican paper represents rare value for
investors, Padilla says, and development
bank bonds convey Mexican government
The pipeline
credit that is guaranteed.
For borrowers, respective costs of
"Chile and Peru government banks
financings will also be a key component in
versus the government trade 100 basis
their decisions on which markets to access.
points apart. So why do Nafin and
Mexico has seven state-owned
Bancomext trade tighter? They are
development banks, including
guaranteed by
Mexico. That
Nafin's volume of operations, 2001-2015
makes them
Commercial emphasis
unique versus
Others (11%)
Chile and Peru
comps," says
Padilla.
Emerging
Industrial (35%)
Service (14%)
market investors
and others
looking for
exposure in
Mexican financial
institutions
have received
attractive
premiums to
Mexico's dollar
Commercial (40%)
curve. Investors
that seek such
Source: Nafin
exposure are
either looking
to hold positions in financial institutions
infrastructure development bank Banco
in the region or normally participate in
Nacional de Obras y Servicios Públicos,
Mexican sovereign transactions, De la
Banco Nacional del Ejército Fuerza Aérea
Peña says.
y Armada, Hipotecaria Federal, Banco del
Dedicated emerging markets investors,
Ahorro Nacional y Servicios Financieros
cross-over investors from the US highand rural government agency Financiera
grade space, sovereign wealth funds
Nacional de Desarollo.
and money managers represented the
Mexican financial entities best
bulk of accounts participating in the
positioned to access international capital
Bancomext deal and an ideal investor set
markets need to have size to be recurring
to participate in Mexican development
foreign-currency issuers and build out
bank transactions.
their own issuance curve, De la Peña says.
"On the UMS side, we wanted
"Entities will most likely continue
development banks to have their own
accessing the international capital markets
name and credit in the market and issue at
through Euroclearable cebures as well as
a tight spread against the United Mexican
through the international dollar market."
States. We understood there would be
a liquidity issue for the first issuance
Sovereign advantage
in a very long time," says Díaz de León
The long absence of Mexican development
noting a 50 basis points pickup offered on
banks from the international capital
Bancomext's bond deal versus the Mexico
markets has increased appetite among
sovereign curve. LF
portfolio managers for access to highinternational markets."
De la Peña adds international capital
markets access depends on how Mexican
borrowers are using proceeds.
Approximately two-thirds of
Bancomext's loan portfolio, for example, is
in foreign currency and Nafin has a dollar
denominated green pipeline that needs to
be funded in the cross-border markets.

March/April 2016 - L ATINFINA NCE.COM 43
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