LatinFinance - January/February 2014 - 37

CORPORATE ISSUER

América Móvil
LOCAL CURRENCY DEAL
FINANCING INNOVATION

América Móvil MXN15bn global peso bond
Pioneering a new type of local currency instrument and
swaggering into European hybrid debt has set América Móvil
apart as Latin America's most sophisticated borrower
its bond market strategy, it said. Indeed, in
February 2013 the telecoms giant tapped
the instrument to add 7.5 billion pesos ($587
million).
The instrument blazed a trail in local
currency debt - a market that is developing
a keen following among international
investors.

©REUTERS

In anticipation of difficult conditions for
US Treasuries last year, América Móvil
toned down its dollar funding plans. The
international telecom giant had raised
$1.6 billion in the dollar market in 2012,
and $2 billion the year before. But in 2013,
the firm focused on its local market and
European ones, raising just $750 million in
dollars.
In late 2012,
the borrower
sold a 15 billion
Mexican peso ($1.2
billion) 2022 bond,
using a new structure
that drew domestic
and foreign investors.
The format, dubbed
Títulos de Crédito
Extranjeros, offers
a liquid instrument
that can be easily
traded between
international and
local accounts,
without separate
bonds or global
depositary notes.
The senior
unsecured note is registered with the US
Securities and Exchange Commission and
Mexico's Comisión Nacional Bancaria y
de Valores (CNBV), and denominated and
settled in pesos. Investors placed orders
totaling more than 50 billion pesos for the
sale, and foreign buyers took 80% of the
bond.
The instrument came with a bold vote
of confidence in the local markets. The
borrower aimed to increase the size of
the security regularly, ideally four times
a year, to reach 100 billion pesos - and
to make the currency the cornerstone of

CARLOS GARCÍA MORENO,
AMÉRICA MÓVIL

"WE DIDN'T GO AHEAD
WITH THE TENDER OF
KPN AND ENDED UP
HAVING TOO MUCH
CASH. WE DIDN'T
THINK WE COULD
JUSTIFY ISSUANCE AT
THAT POINT"

It was not just the novel aspects of the
instrument that distinguish it as Local
Currency Deal of the Year and Financing
Innovation of the Year. Its usefulness is also
clear: fellow Mexican borrower Televisa
demonstrated that when it picked up the
format soon after for its own bond sale.
Nonetheless, the títulos were not
immune from market volatility, and the
borrower stepped back from its planned
quarterly taps later in the year.
América Móvil considered selling a fresh
benchmark of the instrument in November,
but decided not to go forward as it did
not need the funding, says Carlos García
Moreno, chief financial officer of América
Móvil. The firm had amassed acquisition
funds by the time it withdrew an offer to
buy part of Dutch telecom Royal KPN in
October.
"We didn't go ahead with the tender of
KPN and ended up having too much cash,"
García Moreno says about the global peso
securities. "We didn't think we could justify
issuance at that point."
In another impressive transaction, the
telecom turned to the European market in
September, selling a $2.77 billion-equivalent
hybrid security. Such instruments are
rare in Latin America, although familiar to
European investors as many companies
there use them to bolster their capital base.
"The hybrid, developed in Europe
and akin to preferred capital, comes at a
time when certain industries are facing
significant leverage constraints and this
form of capital is a very important and
efficient means of raising capital," says
García Moreno.
The security is subordinated and its
coupon payments are deferrable, meaning
it supports América Móvil's single-A rating,
as ratings agencies account for 50% of it as
equity.
The deal was split between euros and
sterling. A £550 million ($859 million) 2073
tranche, callable in 2020, was priced to
yield 6.376%. The two euro tranches had
the same final maturity. A €900 million
($1.18 billion) part, callable in 2018, was
priced to yield 5.25%, while a €900 million
section, callable in 2023, was priced to yield
6.517%.
The borrower had tapped the two
currencies earlier in the year in senior
unsecured format, as part of a strategy to
diversify its funding. It sold a £300 million
2033 bond yielding 4.948%, and a €750
million 2023 note yielding 3.259%, in midJuly. LF

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