Wednesday, 11 February 2009

Mexican Short-Term Corporate Debt Market is Showing Signs of Revival: New Offerings

As the market for long-term local notes remains virtually closed for most borrowers, Mexican issuers are beginning to scale up offerings of commercial paper in various terms and conditions. In recent days, Standard & Poor's and other rating agencies have been analysing new deals and rating them, such as that by Retailer Liverpool, which may sell up to 700 milion pesos of one-year notes (probably this week.) Docuformas, another company owned by fund Aureos and Stream Lease, plans to sell up to 75 million pesos in 180-day commercial paper. Volkswagen Leasing, as this blog disclosed about a week ago in a posting (click here for link) may sell up to 3 billion pesos of debt in separate tranches, part of a bond fundraising plan worth 10 billion pesos. the notes were rated mxA-1+ by S&P. El Universal, the Mexico City-based newspaper, is also planning a sale of 200 million pesos of short-term paper. The sale may take place in coming days, according to a source.

But there are more deals out there. LatinFinance reported this week that BNP Paribas Personal Finance has also been tapping the domestic debt markets, selling 200 million pesos ''in each of the last 3 weeks, according to a banker managing the sales;´´ sales of BNP commercial paper may amount to a total 1 billion pesos in paper maturing between 30 days and 180 days. Although not commercial paper, Nacional Financiera, known as Nafin, is seeking to place up to 2 billion pesos in notes due Sept. 2010 -- just for 18 months, -- reflecting the lack of depth in the market as investors remain wary of future developments in the credit crisis and its impact on Mexico.

We are witnessing a revival in a market that was badly punished by the rout that began in Feb. 2008 and heightened in Sept. with the demise of Lehman Brothers Inc. Commercial paper is not a cheap tool of borrowing for most companies, but it surely might pave the way for issuances of longer-termed paper in the future. PACCAR Mexico has plans to sell bonds due in 2011 in the local market -- so far the notes with the longest maturity that have been offered to investors in the past three weeks. Although the surge in these commercial paper offerings tend to be viewed with skepticism because, in circumstances like this, they raise concern over liquidity risk, S&P analysts have said in different reports that the success of these offerings depend on the successful debt-strategy and cash-management of each company.

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