It’s one thing when an ambitious company like Coca-Cola Femsa, a Coke bottling operation in Mexico, buys a larger rival like Panamerican Beverages (Panamco), in the largest and most spectacular Latin M&A transaction of 2002. It’s quite another thing paying for it. When Femsa announced the acquisition, it had a $1.55 billion bridge loan from JPMorgan and Morgan Stanley that it needed to replace quickly, as well as a $500 million term loan that it also wanted to refinance.
Continuing to think big, Femsa decided that it wasn’t going to be satisfied with loans alone: it wanted a combination of both peso and dollar loans (one loan, in fact, had both currencies) as well as its very first venture into the domestic Mexican capital markets.
And with its debut issue of Ps4.25 billion ($408 million) of certificados bursatiles, Femsa immediately took the record for the largest ever one-day fund-raising exercise for a corporate in the Mexican market.
The bonds, which were issued at the end of April, came in three tranches: a Ps2 billion four-year floater paying 55 basis points over 28-day government paper; a Ps1.25 billion five-year floating-rate note paying 120bp over the six-month government rate; and a Ps1 billion seven-year bond issued at 100bp over the benchmark Mexican bond of the same maturity. The seven-year paper was the second-longest tenor that any Mexican corporate had ever achieved in the domestic market.
Demand, from pension funds, mutual funds, and some private investors, came to more than Ps6 billion, which meant that the original size of between Ps3 billion and Ps3.25 billion was increased to the final Ps4.25 billion.
Meanwhile, the loans, if anything, were even more impressive. Femsa managed to go all the way out to five years in Mexican pesos, which is about as far as has ever been seen.
The largest loan was a one-year $833 million bridge loan, which was downsized in the wake of demand for longer-dated paper. Ten banks participated in the transaction, including one lender that decided to loan Femsa $93.6 million in pesos instead of dollars.
More interesting, however, was the term loan, which came to $750 million, 34% in pesos. Seventeen banks took part, and bought three different tranches. The shortest was a three-year, $286.5 million bullet maturity paying 85bp over Libor; then there were two amortizing five-year tranches, one in pesos and one in dollars.
This was easily one of the largest loans that Mexico had ever seen, and in fact was so big that it even caught the attention of legendary Chase dealmaker Jimmy Lee, who was centrally involved in the transaction. When Jimmy Lee goes to Mexico, you can be pretty sure something important is happening.
