Investors flocked to a new US$5.5 billion bond from Pemex on Dec. 5, the first dollar deal from a Latin American borrower since Nov. 10.
Mexican stocks and bonds have struggled since Donald Trump's victory in the U.S. presidential elections on November 8, amid concerns around the impact of his policies on the country.
But Pemex's bonds rallied on Dec. 4 after it announced a partnership with BHP Billiton, and it managed to attract more than US$30 billion of orders for Dec. 5's deal.
"Of the issuers that could have come before the end of the year, Pemex is the one," said a banker away from the deal.
The deal offered between 75bp and 100bp of new issue concession at initial pricing thoughts of 6% to low 6% and Libor equivalent for the long five-year fixed and floating tranches; and between 7% and low 7% for the long 10-year.
But pricing was pulled in to launch levels of 5.5% for the US$1.5 billion five-year fixed, L+365bp for US$1bn five-year FRN, and 6.625% for the U.S. $3 billion 10-year.
That implied a new issue concession of about 30bp for each tranche.
Active book-runners on Pemex's deal are Bank of America Merrill Lynch, Citigroup, JP Morgan, Mizuho and Morgan Stanley.
Good Timing
Pemex's 6.875% 2026 bonds were trading up to 26bp tighter over Treasuries on Dec. 4, according to MarketAxess.
"It was opportunistic," said another banker away from the deal. "Oil was trending in the right direction and the announcement yesterday obviously helps."
Pemex said in November that it intended to rely partly on private sector alliances and partnerships to turn around its upstream and downstream businesses and improve its financial profile.
CreditSights analysts said they believed the company was on the "right path," although they expressed concern over its financial burden.
Mexico awarded seven other blocks in the Gulf of Mexico to other oil companies including Total, Chevron Corp. (NYSE: CVX) and ExxonMobil Corp. (NYSE: XOM) in an auction on Dec. 4. Bankers said that benefited Pemex by association.
"It shows a vote of confidence from large global producers in the deepsea oil fields in Mexico," said the first banker.
However, some market participants still expressed concern over the potential effect of Donald Trump's presidency on Mexican businesses.
"The fears are about Trump's stance going forward: Is NAFTA going to be ripped up? Is he going to build the wall?" said the second banker away from the deal.
Governments and companies in Latin America could have their global bond sales in 2017, partly in response to Trump's victory, bankers told Reuters during the week of Nov. 28.
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