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NEW YORK, Jan 28 (IFR) - Mexico's Pemex broke the silence in the LatAm primary markets on Thursday, announcing a three-part benchmark dollar bond that is the region's first corporate offering of the year.
The oil company picked an opportune time, coming on a day when crude prices were rebounding and following headlines that the government might inject capital into the state-owned entity.
Still, leads were seen offering a generous concession based on initial price thoughts of high 5% area on a three-year, 6.625%-6.75% on a five-year and 7.375% area on a 10-year.
Those levels were a good 70bp or more over the curve, where Pemex's existing 3.125% 2019s, 5.50% 2021s and 4.50% 2026s were being spotted at 4.95%, 5.85% and 6.31%, respectively.
At that level the deal is seen coming cheap, especially relative to the sovereign, whose new 4.125% 2026s were trading at a mid-market yield of around 4%.
"That is like a 300bp spread to the sovereign," one syndicate manager away from the deal told IFR. "Traditionally it has traded 80bp-120bp wide."
While oil hit a three-week high on Thursday, Pemex will have to adjust to higher funding costs this year as investors push back on oil and gas names.
"As a result of deteriorating cash flows and credit investors increasingly avoiding the struggling energy sector, Latin American national oil companies will face high refinancing risk," Nymia Almeida, a senior credit officer at Moody's, wrote earlier this month.
Almeida named Pemex as one of the region's oil companies needing to tackle significant debt maturities in 2016 and 2017. (Reporting by Paul Kilby; Editing by Marc Carnegie)