Mexico headquartered telecom America Movil hit the markets with its first dollar bond in over five years on Monday, riding a wave of renewed activity in the Latin American primary markets.
Rarity value for what is still seen as a solid blue-chip name, rated A3/A-/A-, helped bolster demand for the US$2.25bn two-part trade comprising maturities of 10 and 30 years.
The company, part of Mexican billionaire Carlos Slim’s business empire, hadn’t been in the dollar bond market since September 2013 and even then it came with a short dated three-year bond.
“Given the length of time it has been out of the market people should want to grab exposure to the name,” said a syndicate banker.
“I don’t think they have any major funding needs, it is more of a case of keeping their curve relevant.”
Leads were able to tighten pricing a good 20bp from start to finish before landing the 10-year at 115bp over Treasuries and the 30-year at T+145bp
Books peaked at around US$7.5bn earlier in the day, but fell to US$6.7bn - US$3.1bn on the 10 year and US$3.6bn - as investors fell by the wayside due to tighter pricing.
“We like the credit overall but there isn’t much juice to it,” said one investor who decided not to participate.
“It trades like Mexico but it trades through the sovereign. We have decent exposure to it in euros but we aren’t too excited about this.”
Given how little America Movil has issued in the dollar market in recent years, comping against its curve was difficult with the existing 2040s trading at around 145bp over.
As it has done in the past, the telco was seen positioning itself against global telecom companies rather than LatAm focused ones.
That was in evidence from the final 30bp spread differential between its 10 and 30-year.
“Typically the differential on the 10s to 30s curve for single-A US corporates is around 30bp-35bp,” said a second syndicate manager.
“Usually on LatAm curves you see 50bp-60bp depending on the name, so it looks like they are trying to comp against the wider TMT sector.”
Comps used by bankers included some of the heavily leveraged US names like Verizon (Baa1/BBB+/A-) and AT&T (Baa2/BBB/A-), which had 2028 and 2029 bonds respectively trading at G spreads of around 90bp and 142bp.
“It is coming inside of AT&T and back to Verizon, which feels right for this kind of name,” said the syndicate banker.
European telecoms such as Vodafone (Baa2/BBB+), which had 2028s and 2048s trading at G spreads of 152bp and 213bp, were also seen as comparables as well.
America Movil, which operates in 25 countries in the Americas and Europe, announced in March that it would buy 100% of Nextel Brazil for US$905m.
The move was seen as credit positive by Moody’s, which said that the acquisition would move leverage up only slightly to total debt to Ebitda of 2.59x.
In a recent roadshow announcement the company underscored how its Ebitda has recovered from the impact of regulatory and competitive developments in Mexico and said net debt to Ebitda stood at below 2x last year.
That along with lower capex needs saw free cash flow jump from US$1.1bn in 2016 up to US$4.5bn and US$4bn in 2017 and 2018, respectively.
Citigroup acted as sole global coordinators, while also acting as joint lead managers and joint book-running managers along with Morgan Stanley. Barclays and Bank of America Merrill Lynch were active joint book running managers.
