America Movil adds Dim Sum to menu

America Movil on Wednesday lived up to its reputation for opening new frontiers in capital markets, becoming the first Latin American issuer to do an offshore renminbi deal. The transaction was also the first corporate deal in the renminbi market since November 2011.

“This deal is really a pioneer and represents the south-to-south connection that is being talked about, but that until now had not been delivered. No other LatAm name has been able to open this market,” said Katia Bouazza, co-head of global capital markets, Americas, at HSBC.

America Movil was also the first Western corporate issuer to tap the Dim Sum market since September, when US-based Yum! Brands priced a debut three-year bond issue at 2.375% to raise Rmb350m (US$54m).

“This deal is really a pioneer and represents the south-to-south connection that is being talked about, but that until now had not been delivered”

The Mexican telecoms giant had its eye on the market since last year, and in December completed a roadshow in Singapore and Hong Kong, though it was working on the documentation and structure of the transaction before then. 

The deal was also the first Dim Sum bond that was SEC registered, and so it could also be sold to US investors.

“It was important to do this to bring in a broader market and to have a deeper investor base for the renminbi market,” added Bouazza. 

The comparables used were Chinese government agencies such as China Development Bank and Agricultural Development Bank of China, which issued three-year bonds at yields of 3.10% and 3.20% respectively in mid-January. The premium to these names was about 30bp to 40bp.

Impressive

“They are not even directly comparable to America Movil as it is not government owned, not Chinese and it was a first time issuer, so it managed to get a very tight premium,” said Bouazza. This is even more impressive taking into account that Chinese government agencies are rated AA on a global scale, while America Movil is rated Single A.

America Movil issued Rmb1bn (US$160m) after demand reached Rmb2bn, enabling the company to increase the size from the original Rmb750m it had planned. The deal was priced at 3.50%, at the tight end of the 3.50%–3.60% yield that was the official guidance.

There were more than 60 accounts, with half of the investors coming from Asia and the rest from the US and Europe. The investor base was broad, with fund managers, insurance companies, private banks and bank treasuries buying the paper. The three-year bonds settle on February 8. HSBC was the sole bookrunner on the deal.

Proceeds will be used for general corporate purposes, though as America Movil has suppliers in China the expectation is that the proceeds will go towards paying them in renminbi.

And others could follow.

“This benchmark deal will not be a one-off, whether there is another issuance by America Movil or another LatAm issuer. We definitely expect others to follow, though it will be a small selective group,” added Bouazza.