Investors flocked to a new US $5.5bn bond from Mexican state-owned oil company Petroleos Mexicanos (Pemex) Tuesday, the first dollar deal from a Latin American borrower since November 10. Mexican stocks and bonds have struggled since Donald Trump's victory in the US presidential elections on November 8, amid concerns around the impact of his policies on the country.
But Pemex's bonds rallied on Monday after it announced a partnership with BHP Billiton, and it managed to attract over US $30bn of orders for Tuesday's deal. "Of the issuers that could have come before the end of the year, Pemex is the one," said a banker away from the deal. The deal offered around 75bp-100bp of new issue concession at initial pricing thoughts of 6%-low 6% and Libor equivalent for the long five-year fixed and floating tranches and 7%-low 7% for the long 10-year.
But pricing was pulled in to launch levels of 5.5% for the US $1.5bn five-year fixed, L+365bp for US $1bn five-year FRN, and 6.625% for the US $3bn 10-year. That implied a new issue concession of around 30bp for each tranche. Active bookrunners on Pemex's deal are Bank of America Merrill Lynch, Citigroup, J.P. Morgan, Mizuho and Morgan Stanley. Pemex's 6.875% 2026 bonds were trading up to 26bp tighter over Treasuries on Monday, according to MarketAxess.
"It was opportunistic," said another banker away from the deal. "Oil was trending in the right direction and the announcement yesterday obviously helps." Pemex said in November that it intended to rely partly on private sector alliances and partnerships to turn around its upstream and downstream businesses and improve its financial profile.
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