AERMEX on 31 January issued debut senior unsecured bonds at 7% flat (due 2025 and rated B2/BB/NR). As we predicted, the bonds are already trading up and, today, are at cUS$101.00 (ALLQ) to yield c6.76% (g-spread 542bps; z-spread 541bps) – within the range at which we thought they could print.
Comparing the new issue with Latam Airlines (LATAIR), its closest peer in the region (LATAIR is to the Southern Cone what Aeromexico is for Mexico), we believe these bonds are still cheap because:
- LATAIR's US$ 659.844mn (out of an originally issue amount of US$ 845.213mn) 4.2% 1st lien senior secured bond due 2027 (A3/BBB+/NR) trades at cUS$104.226 (ALLQ) to yield c3.32% (g-spread 197bps; z-spread 193bps); and
- The company's 2nd lien US$107.447mn (of an originally issued amount of US$175.610mn) 4.5% bond due 2023 (Baa3/BB+/NR) trades at cUS$101.75 (ALLQ) to yield c3.76% (g-spread 234bps; z-spread 238bps).
Even given the secured nature of the LATAIR bonds and their high ratings relative to the new AERMEX bonds, the substantial spread differential more that adequately compensates investors, making AERMEX, in our view, still attractive and with the potential to tighten further.