Sept. 1 (Bloomberg) -- America Movil SAB’s $2.75 billion dollar bond sale, the Mexican wireless carrier’s first international offering in 14 months, is signaling a revival in overseas issues by corporate borrowers.
America Movil’s issue yesterday snapped a five-week drought in Mexican corporate sales and marked the first offering of more than $500 million by a Latin American company since Aug. 3, according to data compiled by Bloomberg. Corporate sales in the U.S. bond market slumped 49 percent last month to $54.6 billion.
The wireless carrier controlled by Mexican billionaire Carlos Slim is helping lead the rebound in dollar debt sales by emerging market companies as concern the U.S. economy may relapse into recession eases, spurring demand for those nation’s assets. America Movil, whose A2 rating is two levels higher than the Mexican government, returned to the international market after yields on its benchmark securities due 2020 tumbled 53 basis points, or 0.53 percentage point, in the past two months to 3.83 percent, according to Bloomberg data.
“Barring any surprises, I expect that September should be very busy,” Michael Schoen, head of Latin American debt capital markets at Credit Suisse, said in a telephone interview in New York. “In spite of all of the volatility, emerging markets continue to perform well.”
Credit Suisse helped manage America Movil’s Aug. 30 sale of 270 million Swiss francs ($330 million) of bonds expiring in 2017 and yielding 2.04 percent.
Brazilian corporate issuance sank 53 percent last month to $513 million from a year ago while Russian companies sold $150 million of bonds overseas in August, three times less than in the same period in 2010, according to Bloomberg data.
Latin America’s biggest wireless company sold $2 billion of five-year bonds to yield 2.549 percent and $750 million more of its securities due 2040 to yield 5.502 percent. America Movil, based in Mexico City, sold the debt to help finance the $6.5 billion acquisition of Telefonos de Mexico SAB shares it doesn’t own. The deal was managed by Bank of America Corp. and JPMorgan Chase & Co.
A company official in Mexico City declined to comment.
America Movil’s dollar bond sale, the biggest Mexican corporate issue this year, followed an overseas offering by the government this month. Mexico sold $1 billion more of its 100- year bonds to yield 5.96 percent on Aug. 10.
Companies in Mexico and other emerging-market countries that are seeking to issue bonds may struggle to find buyers if there’s renewed concern global growth is slackening, said Luz Padilla, who manages about $400 million of debt as head of DoubleLine Capital LP’s emerging-market fixed-income fund in Los Angeles.
“Whether the deals are able to get done is a question that remains to be seen,” Padilla said in a telephone interview.
The extra yield investors demand to own Mexican government dollar bonds instead of U.S. Treasuries rose three basis points to 199 at 8:11 a.m. New York time, according to JPMorgan’s EMBI Global index.
The peso weakened 0.1 percent yesterday to 12.3466 per U.S. dollar.
Yields on futures contracts for the 28-day TIIE interbank rate due in December were unchanged yesterday at 4.69 percent.
The cost to protect Mexican debt against non-payment for five years fell 10 basis points yesterday to 142, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent if a government or company fails to adhere to its debt agreements.
America Movil said on Aug. 1 that it will buy the 40.4 percent of Telmex, as the fixed-line company is known, that it doesn’t own, giving it full control of its former parent. Slim was named the world’s richest man for a second year in a row by Forbes magazine in March.
Before America Movil’s sales, Mexican issuance had totaled $737 million in August, according to Bloomberg data. The previous corporate offering was by Grupo Elektra SA, a Mexico City-based retail and banking company that sold $400 million of debt on July 28.
The average yield on Mexican corporate dollar debt has dropped seven basis points from a 14-month high of 6.60 percent on Aug. 29, according to JPMorgan.
“The last couple of days have been somewhat stable and that’s the reason why we’re seeing America Movil,” Surat Maheshwari, the head of international syndications at Itau BBA USA Securities in New York, said in a telephone interview. “The money is there, but investors need the right credit to come to the market.”
--With assistance from Crayton Harrison in Mexico City. Editors: Lester Pimentel, Jonathan Roeder.
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