Deals of the YEar awards
Mexico’s government likes to get a jump on meeting its annual funding needs and traditionally, it is one of the first nations to tap international markets each year.
Its offering in January 2022 not only followed precedent, by coming to the market early – with a $5.8 billion in a dual-tranche offering that closed on January 4 – the sovereign was also able to achieve favorable pricing.
MarÃa del Carmen Bonilla, the deputy undersecretary for public credit, says the deal accomplished two things: keeping up a tradition of servicing funding requirements early and taking advantage of market conditions before the external environment deteriorated sharply. She says the government was already mindful of the global spillover of tightening liquidity amid rising geopolitical tensions and an anticipated interest rate hikes in the US.
“It was a very turbulent start to the year but we saw that conditions were right [to issue],†says Bonilla. “It was an opportunity and we took it.â€
Mexico was the first emerging market sovereign to go to the international market in 2022 and the first to issue in dollars. Demand for the bond – larger than most of Mexico’s offerings at the start of any given year – reached a high of $10.4 billion.
The 12-year tranche for $2.86 billion had a coupon of 3.5 percent, the third lowest for a dollar bond placed by Mexico. The 30-year note for $2.93 billion had a coupon of 4.4 percent. The operation allowed the sovereign to address near-term maturities, optimize liquidity and define a new benchmark, says Bonilla.
She says that the $5.8 billion bond followed similar operations in the two years prior that helped Mexico to reduce its amortization profile. The bond helped lower the amortizations scheduled through 2024 by 70%.
“We achieved low nominal rates and were able to execute a change in our profile to provide us with liquidity. It is part of a consistent strategy we have been following,†she said.
The bond also paved the way for other international operations during the year, one other that was “brown†and two that were “green.â€
After the landmark dollar-denominated placement in January 2022, the sovereign tapped the euro market in February, went back to the dollar market in August and then turned to Japan in September.
It issued an 8-year bond for 800 million euros in February to help refinance debt. The bond had a 2.357% coupon and was oversubscribed 2.1 times. It went back to the US market in August 2022 with its first SDG-linked bond in dollars. The bond settled at $2.2 billion with a 4.875% coupon. The bond included provisions for liability management of amortizations scheduled for 2025.
A second ESG bond was completed in September, this time in yen. The $524-million bond came with five separate tenors at 3, 5, 10, 15 and 20 years. The coupon rates ranged from 1% for the notes maturing in 2025 to 2.52% for those maturing in 2042. It was largest ever SDG offering by a sovereign in the cross-border yen market and the 20-year maturity was the longest-dated transaction in yen by the Mexican government.
“The government, with these transactions, guaranteed a healthy level of liquidity, while building a system to finance projects with environmental and social impact,†says Bonilla. LF
Joint Bookrunners: Barclays; BBVA; BofA; Santander
Issuer's Legal Advisor: Cleary Gottlieb
Underwriters' Legal Advisors: Ritch Mueller; Sullivan & Cromwell
All supporting financial institutions and law firms were transmitted to LatinFinance by the award category winners. For updates please email awards@latinfinance.com
