Mexico’s CFE taps Formosa bond market with 30-year trade
The Mexican electric utility becomes the latest lender to print long-dated bonds after Chile, Argentina and Petroperu
CFE became the first Mexican issuer to tap
Taiwan’s Formosa bond market on Thursday, raising
$750m in 2047 paper sold at a yield of 5.15%.
Credit Suisse, HSBC and Morgan Stanley priced the
30-year trade at par, debt capital markets sources said. The
notes come with a 15.5-year average life and sources have said
the long-term bond may serve as a harbinger for similarly-rated
credits both in Mexico and across Latin America.
"If you want to diversify, the Asian markets are a
good option because there is a lot of money to put to work out
there," a DCM banker not involved in the trade said.
Nafin and export credit agency
Bancomext have both talked of possible Formosa bond sales
The same banker also said CFE would have likely
been satisfied with $500m, given its first go around in the
market, but order books were liquid enough to justify a
"They paid next-to-nothing in terms of
concessions, so it would seem like a big win for them," he
CFE seized on an improvement in its outstanding
bonds, which have tightened in secondary trading over the last
month, a second banker noted. The utility’s $700m
in outstanding 2045s have come in 10bp to 12bp in recent weeks
to a yield of 5.68%, while its 2027s tightened at similar
levels to 4.35% on Friday.
Proceeds will finance government-approved electric
infrastructure projects under CFE’s Pidiregas
program. Under Pidiregas rules, amortizing bonds are a
preferred financing instrument because it serves as a yardstick
for project revenues.
Baa1/BBB+/BBB+ rated CFE also notably, is the
first LatAm triple B credit to get a response from
Taiwan’s typically conservative investor base. The
Central American Bank for Economic Integration
(CABEI) was the last name to tap Formosa bond buyers,
raising $167m in five-year floating-rate notes in March, while
Santander Chile printed $185m in 2021 Formosa notes last
Argentina, which have all sold debt maturing at least 30
years or more this month. Investor demand for longer-dated
securities has grown of late as bond buyers search for new
avenues of yield and issuers seek to capitalize on a
predictable interest rate environment, sources have said.
In Mexico, markets are also opening up, with the
peso trading at its highest levels since last
November’s US presidential elections. More
certainty with US and
Mexican interest rates, along with simmered trade rhetoric
from the US administration may have opened up a positive window
for Mexican credits.
Grupo Kuo booked investor meetings for a potential bond
Banorte talked plans of a Basel III-compliant trade. Cement
Grupo Cementos de Chihuahua also sold $260m in 2024s this
month, issuing the new bonds in conjunction with an exchange
for its 2020s.
sold bonds in October last year, raising $1bn in 2027s. In
June 2015, the utility
printed $700m in 2045s.