Latin America Loan: Gondi's Ps7.4bn 10-year term loan and US$75m private placement

IFR Awards 2019
3 min read
Aaron Weinman

Beyond the norm

Mexican pulp and paper company Grupo Gondi ticked all the boxes with its latest refinancing effort, covering its immediate liabilities through a rare 10-year term loan and reverse-flexing pricing after heavy demand from a surfeit of lenders.

In September, Gondi’s dual-currency financing came to approximately US$455m, with a Ps7.4424bn 10-year unsecured term loan and a US$75m private placement. And while it was not the year’s largest transaction, Gondi’s loan was the only corporate deal from Latin America to stretch out that long.

Lead arranger Credit Suisse initially sought up to US$290m, divided between five- and seven-year tranches, which are the typical sweet spots for corporate loans in the region.

More than 20 institutions attended a bank meeting and many were keen to capitalise on the scarcity of middle-market loans from Mexican borrowers.

The demand not only enabled the company to increase the size of the transaction, but Credit Suisse also revised the pricing grid, lowering spreads by 5bp–30bp, and introducing an unprecedented 10-year peso-denominated tranche.

“We realised there was 10-year money out there and we also reverse-flexed,” said Michael Jakob, managing director in loan syndications for Credit Suisse. “This is very rare in the Latin American loan market. After the feedback, we revamped the deal and kept the book together with tighter pricing.”

Lenders flocked to the transaction during syndication, with 17 institutions committing roughly US$1bn to the term loan, while the private placement netted US$150m in demand.

“Once we took input from other banks and tested their appetite for longer tenors, we were positively surprised about how much demand there was,” said Jakob. “We had to eliminate some [of the demand] in the final allocation.”

Gondi not only took the market by storm with the longer maturity, but it also showcased how robust the country’s lending base is. Eight lenders, half of them Mexican, joined Credit Suisse on the term loan syndicate, while a private insurance company soaked up the private placement after expressing interest.

The credit agreement also comes with a flexible covenant package that will allow Gondi to pre-pay the loan and there is an accordion feature for capital expenditure requirements.

Gondi substantially extended the average life of its debt and amortisation profile, refinancing a bunch of liabilities in one deal, with one agent bank. The company scored wins, not just on price and tenor, but forged new lending relationships domestically and internationally.

The term loan pays between 170bp–250bp over TIIE, while the private placement priced at a fixed rate of 4.20%.

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