Sigma gets ball rolling after Argentina's return
By Paul Kilby
NEW YORK, April 25 (IFR) - Mexico's Sigma got the ball rolling in Latin America's primary market on Monday, arriving on the coattails of Argentina's historic return to the capital markets last week.
The frozen foods company, part of conglomerate Alfa, is approaching investors with a 10-year bond rated Baa3/BBB/BBB via active books Bank of America Merrill Lynch and JP Morgan.
Initial price thoughts are 262.5bp area, essentially flat to Sigma's lower-rated parent Alfa (Baa3/BBB-/BBB-), which has a 2024 trading with a G spread anywhere between 260bp and 265bp.
As the highest revenue generator among Alfa's subsidiaries last year, Sigma is expected to trade inside the operating company - and hence has room to tighten.
"I see fair value at 237.5bp, so they will walk this thing in about 30bp," one New York-based trader told IFR.
Comparables include other Triple B food companies in Mexico, such as baker Bimbo (Baa2/BBB/BBB) and tortilla maker Gruma (BBB/BBB) which have 2024s being quoted at G spreads of around 210bp and 215bp respectively, according to an investor.
Those companies should arguably trade tighter to Sigma, given their larger presence in the US, the investor said, voicing concerns about Sigma's FX exposure as it takes on more dollar debt.
"It is a solid business, but what concerns me is that they won't hedge (dollar debt) and about 50% of their business is in Mexico and Latin America," he said. Continuación...