One of the more remarkable aspects of the crisis that has gripped the financial markets over the past few months is that some Latin American credits have become safe havens. At 4.68%, Brazil’s 10-year benchmark bond yield, for example, is trading well inside equivalent notes for Portugal and Greece and on a par with Spain. Don’t forget that this is an election year in Brazil, with all the uncertainty that political risk in the region brings.
It’s not just at sovereign level that the best Latin borrowers are proving their credentials. Last month Mexican telecom América Móvil, part of multi-billionaire Carlos Slim’s empire, priced a €2.5 billion-equivalent triple-tranche bond in sterling and euros in a deal that blew out any other new issue in the investment-grade sector over the past few months.
The transaction included a €1 billion, 3.75% seven-year tranche; a €750 million, 4.75% 12-year note and a £650 million ($980 million), 5.75% 20-year bond. All three tranches were priced at the tight end of the range. They were also priced well inside where Spain’s Telefónica is trading and even inside some of BT’s bonds. Demand reached €4.5 billion for the euro tranches and £1.3 billion for the sterling slice. HSBC and Deutsche Bank led all three pieces. BNP Paribas was also on the euro-denominated tranches.
As well as the pricing, what stood out was the quality of the investor book, with the bonds largely placed among high-grade investors. With a rating of A2/A–, América Móvil is rated two notches above the sovereign, demonstrating that the only emerging market characteristic of the company is where it is headquartered. It is the fifth-biggest telecom in the world by market capitalization. In 2009, the free cashflow it generated exceeded that of AT&T.
The deal is América Móvil’s second big international bond this year. In March, it raised $4 billion, through five-year, 10-year and 30-year offers. It has also raised money in the Swiss franc market.
América Móvil, together with other blue-chip borrowers, including Coca-Cola Femsa, Televisa, Vale, and even Grupo Bimbo are part of a growing band of Latin American corporates that global investors can no longer afford to ignore. They are world-class, financially strong and with global ambitions.
Take Bimbo, the Mexican bread maker. It’s the largest baking goods company in the US thanks to an acquisition there last year. It generates strong cashflow and maintains a low leverage level. Last month, the Baa2-rated company priced its debut $800 million, 10-year bond at 180 basis points over US treasuries – the second-lowest yield ever for a Latin American corporate. High-grade investors bought 60% of the deal, demand for which hit $2 billion from almost 200 funds.
At a time when even high-quality borrowers in Europe and the US have struggled to gain market access it’s testimony to Latin America’s resolve that its borrowers are proving so attractive.
