LatinFinance - January/February 2013 - 38

years and creating a lasting benchmark for
other Mexican issuers. The lowest coupon
and yield at the long end of the curve were
also firsts, not to mention a solid 10 basis
point concession over its curve-adjusted
secondary levels pre-announcement. The
deal attracted a $6.5 billion book from
approximately 285 accounts. Citi and
HSBC managed the transaction.

“Our new benchmarks
	 had to be large and of
meaningful size, as
	 investors value liquidity”
	
	 Alejandro Díaz de León,
	 Mexican finance ministry

In June, Mexico became the first BBB
rated borrower to issue a Samurai bond
without JBIC support, placing ¥80 billion
($1 billion) in three and five-year bonds in
the Japanese market. Japanese investors
were first sounded out for the deal in
August 2011.
The sovereign priced ¥50 billion in
2015 bonds at par with a 1.29% coupon,
to yield yen Libor plus 89 basis points, and
¥30 billion in 2017s at par with a 1.56%
coupon, to yield yen Libor plus 110 basis
points. Each part landed at the tight end
of price thoughts of yen Libor plus 80 basis
points to 100 basis points for the 2015
and 100 basis points for the 2013. Mexico
had until then sought longer maturities
but with the aid of a JBIC guarantee, most
recently selling ¥150 billion in of 10-year
bonds at a 1.51% yield, or yen Libor plus
50 basis points, in October 2010. Citi,
Mitsubishi UFJ-Morgan Stanley, Nomura
and SMBC Nikko managed the transaction.
The year’s activity ended in August,
before the new administration took office,
when the sovereign sought to address the
still-large 10 and 30-year benchmarks that
the 2012 dollar issuance had replaced.
The $2.2 billion exchange of off-the-run
securities steered buyers into re-openings
of the new benchmark 2022s and 2044s

38 LatinFinance

DOTY stories-Final.indd 38

issued in 2012, and also the 2110
century bonds. It was the first liability
management exercise that included a
100-year bond.
“Our new benchmarks had to be large
and of meaningful size as investors value
liquidity,” Díaz de León says. “We wanted
to exchange off-the-run bonds in exchange
for three of the newest and most relevant
on-the-run bonds – our 2022s, 2044s and
our century bonds.”
The offer was based on a modified
Dutch auction was open for four days.
Mexico targeted six series of outstanding
notes due 2013-2017 representing $10.4
billion, and nine series due 2019-2040
totaling $18.6 billion outstanding,
resulting in 36 possible exchange
combinations. Holders received new bonds
at a specific ratio plus a possible cash
consideration, both varying depending
on which specific securities are involved.
Bank of America Merrill Lynch, Credit
Suisse and Goldman Sachs managed the
transaction.
Together, the four transactions
serve as a reminder of why Mexico has
long been considered the region’s top
government borrower and why it will be
hard to displace it in that role – even as
the sovereign faces mounting competition
from an ever larger pool of investmentgrade countries across the region. LF
____________________________________

Corporate Issuer
Pemex

_____________

Local Currency
Financing

Pemex MXP10bn 10-year GDN
_____________

Trade Financing
Pemex $1.2bn Ex-Im Bank
Guaranteed 2022 Bonds

____________________________________

M

exico’s state-owned oil producer,
Pemex, has long enjoyed one of the
largest followings in the dollar market

among LatAm issuers. In 2012, it took
advantage of the country’s improving
economic outlook, while providing
emerging market investors and crossover
buyers around the world with access to
the Mexican story.
With an expansive capital
expenditure programme targeted at
exploration and oil production, Pemex
has had to make frequent visits to the
debt capital markets while looking for
novel ways to tap sources of funding that
offer cost savings versus dollars.
It capped off the final months of 2011
with the region’s first cross-border bond
sale in more than a month, making an
opportunistic retap of its 6.5% 2041
bonds that allowed it to raise $1.25
billion. The state-owned oil producer
with the support of a $300 million
reverse-inquiry priced at the tight end of
the US Treasuries plus 320 basis points
guidance, to yield 6.339%. BNP Paribas
and Deutsche Bank managed the sale.
In April, Pemex became the first
Latin American credit to issue a bond
in Australian dollars, which had been
discussed as a possible pool of liquidity by
other borrowers in the region. The state
oil company raised A$150 million ($156
million) priced at 99.715, with a 6.125%
coupon, to yield 6.193%, or mid-swaps
plus 195 basis points, the tight end of
mid-swaps plus 195-200 basis points
guidance, and was seen pricing at 25
basis points inside Pemex’s dollar curve.
HSBC managed the transaction.
The deal followed a 300 million Swiss
franc ($326 million) transaction in March
2012 which priced at 100.823 with a
2.5% coupon to yield 2.371%. Credit
Suisse managed the sale, its fifth ever
in the currency and first in two years.
Pemex has been one of the region’s most
active borrowers in currencies other than
dollars, and 2013 should be no different.
“We would certainly look at the euro[denominated] market as we do every year
and we would look at some currencies in
Latin America,” says Mauricio Alazraki,
Pemex’s treasury director. “The swap
to dollars makes it difficult to structure
those trades, but Pemex could turn to
South American currencies such as Peru
or Colombia which might make sense in
our funding program.”

January/February 2013

1/9/13 12:05 PM
LatinFinance - January/February 2013

Table of Contents for the Digital Edition of LatinFinance - January/February 2013
