Petroleos Mexicanos, or Pemex, Tuesday afternoon priced a US$1bn 10-year note offering with a 6.70 yield as part of a larger financing package to help stabilize its finances and manage its liabilities.
The offering received around US$5bn of orders, according to a source familiar with the deal, adding that there were a variety of investors including large US real money accounts.
"It was well received," the source said.
Initial price thoughts were in the high 6% area. The final pricing for the note due 2032 was structured with a coupon of 6.70% with a dollar price of 99.976 to yield 6.70%.
Yesterday the Mexico-based oil and gas company announced that it would refinance some debt and make tender offers for other bonds as well as receive US$3.5bn of capital from the Mexican government.
Pemex said in a statement on Monday that it would launch a "series of measures intended to improve its financial condition, including the commencement of an offering of US dollar-denominated global notes ... and its intention to conduct a liability management transaction targeting certain series of PEMEX outstanding securities. In addition, the Government of Mexico announced that it will make a capital injection of up to US$3.5 billion in PEMEX in connection with the liability management transaction discussed above."
The company is offering to exchange 12 series of maturities ranging from 2024 to 2030 for a combination of new securities and cash, while it would make cash offers for the 5.625% bonds due 2046, the 5.500% bonds due 2044, the 6.350% bonds due 2048, the 6.375% bonds due 2045, the 6.750% bonds due 2047, and the 6.950% bonds due 2060.
Proceeds from the note sale are expected be allocated initially to the refinancings and any remaining proceeds will be allocated to the tender offers. The 144A/RegS unsecured note offering will be underwritten by active bookrunners Bank of America, Citigroup, Goldman Sachs and HSBC. Initial price thoughts were in the high 6% area.
"The liability management transaction does not target outstanding PEMEX securities maturing in 2022 and 2023, given the commitment from the government of Mexico to ensure budgetary allocations for additional capital injections to PEMEX to cover said maturities," Pemex said.
S&P Global Ratings, which rates Pemex's foreign currency issues BBB and local currency BBB+, both with negative outlooks, said its ratings on Pemex and its subsidiaries were unaffected by the announcement.
Lucror Analytics said in a research note that Pemex is seeking to price up to US$1bn in new 10-year notes.
"We reiterate our constructive view on the company, as the proposed transactions further underpin our thesis of continued strong implied government support," Lucror said. "We expect the PEMEX curve to react positively to the announcement, with the proposed notes likely to price close to the existing 5.95 '31s, currently offered at c. 96.7/6.4%/6.7 years."
LatAm volume for December kicked off yesterday with US$1bn split between two issuers: a US$500m note from Alsea, a Mexican restaurant operator, and a US$500m issue from Banco de Chile, a bank based in Chile.
Updated story: Updates with final pricing and books