LatinFinance - January/February 2016 - 32

instrument, while other entities, including
pension funds, insurance companies and
mutual funds took the rest. The century
bond was Mexico's third, following
issuances in dollars and pounds.
"It is not easy to issue a 100-year bond.
One of the prerequisites is that you are a
frequent issuer in the market in which you
want to go with the ultra-long tenor," says
Díaz de León.
"First, you need to have a regular
presence in the market and develop your
yield curve. Second, you need a strong
credit and a good outlook so that you
can appeal to investors that see value in
buying that security and that they know,
or their expectation is, that you are in a
strong credit."
Díaz de León, who was replaced by
Alberto Torres García in November, says the
euro market will likely provide better rates
for Mexico and other borrowers because
of the impending rate hike from the US
Federal Reserve.
"We continue to see a divergence of
monetary policy in Europe vis-á-vis the US.
I think this will continue to offer funding
opportunities in the euro market."
Looking ahead, Díaz de León, now
chief of Mexican export credit agency
Bancomext, says that while Mexico did not
visit the Japanese market for funding this
year, it will look for opportunities for Yen.
"We think it is important for us to do that
on a frequent basis. It's important to keep
and maintain that market open for us. This
is clearly one of things we have on the radar
screen." LF

CORPORATE ISSUER
QUASI-SOVEREIGN BOND
FINANCING INNOVATION

PEMEX $6BN JUMBO
BOND & MXN9BN
EURO CLEAR BOND
The oil company once again
led the way for Latin American issuers with a breadth
of transactions, from the
very large to the very novel
Mexico's state-owned oil company hit
the bond market several times during the

32 LATINFINANCE.COM - January/February 2016

Issuer: Pemex
Finance Type/ Size: MXN9bn
($609m) Euroclearable 2026
Supporting Banks: BBVA, Bank of
America-Merrill Lynch, Citi, HSBC,
Morgan Stanley
Law Firms: Cleary Gottlieb,
Shearman & Sterling, Ritch Mueller

awards period, proving itself once again
to be the largest and most-dynamic bond
issuer in Latin America.
Pemex tapped the cross-border and
local markets, pioneering new platforms
for Mexican borrowers. Although other
issuers brought impressive transactions,
Pemex's ability to innovate and its
popularity with banks and investors,
despite falling oil prices, earned it
Corporate Issuer of the Year.
In January 2015, as investors gaped
at the rapid drop in oil prices, Pemex
stepped assertively into the market to
sell the largest-ever bond from a Mexican
corporate. The company raised $6 billion
across three tranches. The transaction's
size, complexity and timing merit it
LatinFinance's Quasi-Sovereign Bond of
the Year.
The transaction fit into Pemex's plan to
foster liquidity in its debt instruments and
to diversify its investor base.
"Over the past three years we have been
focusing on the most relevant markets,
dollars, pesos and euros," says Rodolfo
Campos, managing director of finance and
treasury, and interim chief financial officer
at Pemex. "We try to be very consistent
with big sizes to enhance liquidity"
Despite its size, the issue was three
times oversubscribed, allowing BBVA,
Citi, HSBC and Morgan Stanley to tighten
pricing on the five, 10 and 30-year
tranches on offer. Pemex walked away
with a 3.515% $1.5 billion 2020 bond, a
4.521% $1.5 billion 2026 tranche and a
5.675% $3 billion 2046 instrument.
US investors and fund managers drove
the bulk of the demand across the three
tranches, with strong participation also
from European buyers and bank investors.
In the Quasi-Sovereign Bond of the Year
category, Petrobras' 100-year bond was
another strong contender. After publishing

Issuer: Pemex
Finance Type/ Size: $6bn across
2020, 2026 and 2046 bonds
Supporting Banks: BBVA, Citi,
HSBC, Morgan Stanley
Law Firms: Cleary Gottlieb,
Shearman & Sterling, Ritch Mueller

its long-delayed audited financial results in
April, complete with a write-down for the
Lava Jato corruption scandal, the Brazilian
government-controlled oil company took
the bond market by surprise, issuing a rare
"century" transaction.
At the time of sale, the deal was
applauded by bankers. It marked the
return, in intrepid style, of one of Latin
America's biggest debt issuers. But as
Lava Jato continued to erode confidence
in the country and investor confidence
in Petrobras faltered, the transaction
performed poorly in the secondary market.
While Petrobras' execution of the bond
was impressive, its secondary performance
counted against it in this category.
Pemex's impressive market activity
continued after its $6 billion January issue.
Shortly after, the Mexican issuer returned
to the market to pave the way for Latin
American corporate borrowers in a new
format: Euroclearable notes.
In early February, Pemex and
bookrunners Banamex, Bank of AmericaMerrill Lynch, BBVA Bancomer, HSBC,
Morgan Stanley and Scotia priced another
triple-tranche bond. This 24.3 billion
peso ($1.6 billion) instrument marked
the first time a Mexican corporate had
used the Euroclear clearinghouse. The
format makes it easier for international
investors to participate in locally registered
transactions.
The deal came after extensive
preparatory work. Incorporating
international clearinghouses, "was our
idea but very supported by the federal
government because they had to change
some local tax regulations", says Campos.
With the government modifying its capital
gains tax for foreigners holding corporate
debt, Pemex then used Euroclear, and
later Clearstream, to get a larger group
of international investors to buy its local
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Table of Contents for the Digital Edition of LatinFinance - January/February 2016
