18 de noviembre de 2014 / 17:52 / en 3 años

Mexico breaks new ground with issuer-friendly bond

NEW YORK, Nov 18 (IFR) - Mexico is poised to become the first Latin American country to sell a bond with new-style collective action clauses (CACs) that make it harder for holdout creditors to fight restructurings.

The issuer-friendly bond contains clauses designed to avoid another Argentina, where a small group of holdouts have embroiled the sovereign in years of legal and financial battles.

While Kazakhstan and Vietnam have taken similar steps, Mexico's move is seen as particularly significant because it is a much bigger borrower in the international capital markets.

Though the clauses were proposed by the International Capital Markets Association and backed by the International Monetary Fund, they are yet to be widely adopted.

"For an issuer like Mexico, the difference between old and new CACs doesn't make a huge difference," said a New-York based syndicate banker not involved in the deal.

"They are doing it more to help establish the new standard set by the IMF and ICMA."

Rated A3 by Moody's and BBB+ by S&P and Fitch, Mexico began gauging investor demand for the US dollar-denominated deal at initial price thoughts of Treasuries plus 150bp area and brought that in to 140bp area (plus/minus 5bp) by midday.

It is aiming to price the deal later on Tuesday.

Some observers said the IPTs looked generous based on where Mexico's outstanding bonds are trading.

The sovereign's 4% 2023s, for example, were spotted at spreads of around 120bp-125bp, according to market participants, putting the initial concession of IPTs at around 30bp.

That was probably more related to the amount of the debt the issuer was looking to raise than the inclusion of CACs, they said.

"I am guessing this will be a sizable trade," said one origination banker not involved in the transaction.

Others said softer market conditions also likely had an influence on initial marketing levels for the trade, which is being led by Goldman Sachs and JP Morgan.

"I would think they are looking for at least US$1.25-US$1.5bn," said the syndicate banker. "This market is one where you start with a little more juice."

According to the new clauses, if 75% of a bond's holders agree on new terms, those revisions are binding on all investors. (Reporting by Davide Scigliuzzo; Editing by Natalie Harrison and Marc Carnegie)

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