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Monday, 23 October 2017

A new face

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Working to transform itself from a regional mobile player into a global telecom heavyweight, America Movil went on a funding spree between 2009-2010 that made it one of the most active borrowers out of Latin America. During that time it raised some US$6bn plus, creating new benchmarks along its dollar curve, diversifying its funding base and positioning its self as a truly global credit. Paul Kilby reports.

America Movil has always been known as a skilful navigator in a debt market where it has benefited from rarity value and been able to squeeze pricing to its advantage. But after integrating with its fixed-line sister subsidiaries under the business empire of Mexican billionaire Carlos Slim, the mobile phone company has faced new challenges.

This has mostly involved convincing investors that the new entity was a move in the right direction, and an essential part of any Mexico or telecom portfolio. A strong cash position meant it could be opportunistic. But once America Movil decided to move it wasted little time, raising some US$5.4bn in March 2010 as it trawled both local and international markets to tell its new story. It has consistently pushed the message that accounts could not afford not to have the global telecom powerhouse in their portfolios, whether they were domestic pension funds or telecom players in the international markets.

The Swiss franc market proved to be a good testing ground to gauge international investor reaction to America Movil’s decision to merge with sister entities Carso Globo Telecom and Telmex Internacional. This debut issue in Switzerland also allowed it to get a feel for what the true credit costs would be for the new entity before venturing out into the deeper dollar sector. But the move was also part of a broader diversification strategy for a corporate that has traditionally stuck to dollars or Mexican pesos, at least in the international markets.

“Right now we are a much larger company so we don’t want to confine ourselves to the US market. In that sense we want a very well diversified funding base,” said Ricardo Rivera, the company’s treasurer.

Costs were also seen as attractive for a borrower known for pushing the limits on pricing after it raised SFr230m (US$215m) through a five-year at a yield of 2.24% or mid-swaps plus 65bp. The then rated A3/BBB+/A- issuer bettered sovereign Poland (A2/A-), which just the day before came with a four-year Swiss franc offering at mid-swaps plus 88bp.

The success in this niche market has left America Mobil wanting more, after the five-year traded up nicely o around 101.00-102.00 versus a reoffer of 100.047. “The response we found there was very encouraging,” said Rivera. “I don’t think we could rule out doing something else in the Swiss market in coming years.”

America Movil had conducted a similar exercise in the Mexican markets earlier that month when it raised Ps15bn (US$1.17bn) through a multi-tranche offering that included a 10-year fixed-rate bond, a five-year floater and an inflation linked zero coupon 15-year.

An issue that was rated above the sovereign was welcomed by local accounts, though tight pricing drew some complaints. In the end the borrower raised an impressive amount for the domestic sector, taking advantage of the pent excess liquidity in market that had been essentially shut for several months. 

The integration of Telmex Internacional with the mobile concern has come under some criticism of late and has been viewed by some as a way to rescue the tougher fixed line business. But at the time, the move seemed to go down well, at least with bond investors.

The ultimate test came in late March when the company pulled the trigger on a jumbo US$4bn issue that established five, 10 and 30-year benchmark bonds across the curve. By then, America Movil could boast of across-the-board Single A ratings. The deal allowed the company to firmly plant itself in the dollar markets as a true global telecom with a better credit quality than most of its peers.

At US$4bn in size, the issue proved to be one of the largest ever corporate offerings seen out of the region after generating some US$10bn in demand.

The company is now looking to refinance a US$2bn loan maturing next year in 2011. Indeed size may be larger this time around as the mobile phone company moves to consolidate debt of its new fixed line operations. “In that sense we are looking to take on more exposure to the banks as we look to repay bank debt at the subsidiary level,” Rivera added.

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