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NEW YORK, June 7 (IFR) - Banks are marketing a 15-year bond of around US$500m in size to finance KKR's purchase of Pemex assets after failing to attract sufficient interest in a previous loan deal, sources told IFR.
Morgan Stanley is left-lead on the bond, which could price as soon as next week, with Credit Agricole, Mizuho and SMBC also participating as bookrunners, the sources said.
The bond is expected to fill the gap left over from a multi-tranche loan that had been expected to be US$1.35bn in size, but was reduced to US$500m amid push-back over exposure to Pemex and the broader oil and gas sector.
"It was an ambitious number but they were restricted by market appetite," a loan banker told IFR.
"The risk is mitigated because it is secured by assets that Pemex needs to operate, but certain banks have already capped their exposure [to Pemex]."
Only four banks participated, even after margins were flexed higher.
A US$100m 12-year term loan finally landed at around Libor plus 360bp, some 85bp wide to the original 275bp spread, according to a source.
A US$115m five-year and US$235m 10-year term loan, as well as a US$50m five-year revolver, were also flexed in a similar manner, he said.
Proceeds from the senior secured loan will fund the US private equity shop's sale-leaseback agreement to invest in 15 separate Pemex infrastructure assets.
The assets are 11 pipelines, one set of subsea cables, 2 non-drilling platforms and one gas compression facility.
Under the agreement, Pemex sells the assets to KKR while continuing to operate and maintain them. The oil company makes lease payments to KKR during the 15-year life of the agreement, after which time it will buy back the assets.
The transaction was seen as a way to quickly monetize Pemex's assets, with hopes of setting a precedent for other private equity firms to invest in Mexico's energy sector. (Reporting by Paul Kilby and Karen Schwartz; Editing by Marc Carnegie)