Flash Fixed Income Report /
Mexico

Mexico's Industrias Peñoles to issue new bond

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    28 August 2019
    Published by

    Mexico's mining giant Industrias Peñoles S.A.B. de C.V. (PENOMX) – the world's leading producer of silver – is expected to meet with investors on 2-4 September, with the purpose of issuing a benchmark-sized, U.S. dollar-denominated, senior unsecured bond. No maturity or price guidance is available yet.

    Peñoles has two bonds outstanding:

    1) Its US$400mn 5.15% unsecured bonds due 2020 (Baa3/BBB/BBB-), Series 10-2, which trade at cUS$102.331 (ALLQ) to yield c2.81% (g-spread 109bps; z-spread 106bps); and

    2) Its US$200mn 4.26% unsecured bonds due 2022 (Baaa3/BBB/BBB-), Series 12D, which trade at cUS$103.897 (ALLQ) to yield c2.81% (g-spread 138bps; z-spread 140bps).

    We believe Industrias Peñoles is likely to seek an intermediate maturity of c10 years, which is the original tenor of its two outstanding bonds. If the company is looking to use the proceeds from this issue to pay back its outstanding bonds, the size of the new issue could be between US$600mn and US$1.0bn, in our estimation.

    In terms of pricing, we believe the new bonds will not deviate much from the levels of the outstanding bonds, adjusting for tenor – given the high quality of the company and the credit, the chances of a concession for investors are slim.

    We do not have a recommendation on PENOMX.