Flash Fixed Income Report /
Mexico

Mexico: Peñoles's new two-tranche issue; attractive 10-year bond

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    5 September 2019
    Published by

    Industrias Peñoles S.A.B. de C.V. (PENOMX), one of the largest silver producers in the world and one of the best mining companies in Mexico (owner Alberto Bailleres enjoys a good relationship with President Andres Manuel Lopez Obrador), is expected to come to the bond market with a two-tranche issue:

    1. A 10-year senior unsecured bond with an expected BBB/BBB rating, and initial price guidance of T+300bps; and
    2. A 30-year senior unsecured bond with an expected BBB/BBB rating, and initial price guidance of T+400bps.

    As a reference, the company has a US$400mn, 5.15% unsecured bond due 2020 (Baa3/BBB/NR), currently trading at cUS$102.375 (ALLQ) to yield c2.71% (g-spread 100bps; z-spread 96bps). These bonds have a duration of 0.982 years.

    Based on this, we see the 10-year tranche as attractive, although we expect the final issue price to yield around T+250 bps since we believe there will be high demand due to the company's solid investment grade rating. 

    In the case of the 30-year tranche, we believe that the end yield will be closer to T+375bps – somewhat less attractive at the initial price guidance level. Even less attractive is the issue price, which is tighter than the guidance level.

    Pricing should be today.