LatinFinance - January/February 2015 - 46

SOVEREIGN ISSUER

United Mexican States
With liability management, a rare long-tenor deal in yen
and a 100-year sterling bond, the issuer retains its lead
among regional sovereigns
The United Mexican States consolidated
its position as one of the most nimble and
innovative emerging market bond issuers
over the period of these awards. The
sovereign has been unrivaled in its efforts
to access new markets, a push that has
diversified its currency exposure and lured
new investors, while cementing its position
as a leading Latin American issuer in the
dollar market.
The public credit office,
led by Alejandro Díaz de
León, has won plaudits from
banks and investors alike for
pushing the boundaries with
a long-tenor deal in yen, a
100-year bond in sterling,
and a complex intraday
liability management
exercise to buy back old
debt. Meanwhile, although
Mexico has shone in the
cross-border arena, it has
also taken advantage of
strong liquidity in the local
market, where it issues 80%
of its debt.
"Diversification has
brought advantages,
because it has provided us
with alternative sources of
financing, with different
types of investors, and
that is good [...] because
in the past few months we
have seen volatility in hard
currencies," Díaz de León
tells LatinFinance.
"The dollar has stayed relatively strong,
and there has been a depreciation of the
euro and the yen. The financing that we
have done in the past few years in euros
and yen has been beneficial as way to
hedge against those movements in the
exchange rate."
The sovereign was the first Latin
American borrower to tap the dollar
bond market in 2014, with a $4 billion

46 LATINFINANCE.COM - January/February 2015

dual tranche transaction that was priced
on January 9. Some 260 investors placed
around $6 billion in orders for the
sovereign's new $1 billion 2021 and $3 billion
2045 bonds, priced at 3.5% and 5.55%,
respectively - levels that sources said were
fair but not cheap. UMS opened an intraday
liability management exercise at the same
time, buying back $1.5 billion of older debt.
"We have sought to consolidate issuance

start, so that the deal has more play in the
secondary market, because it grabs the
attention of investors."
Mexico's ultra-long sterling deal again
highlighted how confident investors are
about the country's long-term prospects.
The sovereign raised £1 billion from the sale
of a 100-year bond, its first at such a long
tenor outside the dollar market.
Mexico had targeted a benchmark
size, which means around £300 million
in the sterling market, and even though it
raised the size of the offering to £1 billion to
ensure a liquid instrument, it was still able
to trim 25 basis points from initial price
thoughts, pricing the note to yield 5.75%.
Increasing the size of a deal like this, as well
as tightening the price, is something few
issuers can do.
ALEJANDRO DÍAZ DE LEÓN, MEXICO

"DIVERSIFICATION HAS
BROUGHT ADVANTAGES. IT HAS PROVIDED
US WITH ALTERNATIVE
SOURCES OF
FINANCING, WITH
DIFFERENT TYPES OF
INVESTORS, AND THAT
IS GOOD [...] BECAUSE
IN THE PAST FEW
MONTHS WE HAVE
SEEN VOLATILITY IN
HARD CURRENCIES"

PUSHING BOUNDARIES: Mexico's
head of public credit Alejandro Díaz
de León has managed new long tenor
cross-border deals outside the dollar
market

with sizable amounts so that they have a lot
of liquidity," says Díaz de León. "We've tried
to underpin the new benchmark issuances
with liability management exercises that
increase the scale of the issuance from the

The sterling deal was Mexico's first crossborder transaction after Moody's upgraded
the sovereign's rating a notch to A3 in
February.
Mexico pushed boundaries again when it
raised 60 billion yen ($590 million) in July in
a triple-tranche transaction. The borrower
secured its best-ever financing rates, in any
currency, in five, 10, and 20-year maturities,
with yields of from 0.8% for the five-year
tranche to 2.57% for the 20-year note.
"This was the first time that an emerging
market issuer sold a 20-year tranche [in yen]
since the 2008 crisis. Being able to issue in
this tenor shows how strong [the] appetite
is for paper issued by the Mexican federal
government," says Díaz de León. LF
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LatinFinance - January/February 2015

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