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