Mexico is turning to global bond markets to finance the repurchase of its existing debt, amid growing pressure from credit rating agencies to control the public deficit.
The country is issuing new bonds maturing in 2037 and renegotiating bonds maturing in 2056, according to a preliminary prospectus filed with the Securities and Exchange Commission (SEC).
The initial price is around 220 basis points above Treasury bonds for the 2037 bonds and between 220 and 225 basis points for the 2056 bonds, according to sources familiar with the matter who requested anonymity.
Mexico will use the proceeds from the debt sale to repurchase dollar-denominated bonds maturing in 2027 and 2028, and euro-denominated bonds maturing in 2029, the sources said, requesting anonymity due to the confidentiality of the information.
This transaction comes at a time when Mexico is facing pressure from major credit rating agencies to reduce its budget deficit or risk its coveted investment-grade rating.
In May, S&P Global Ratings revised its outlook on Mexico to negative, citing persistently poor fiscal results, rising debt levels, and weak economic growth.
Moody’s Ratings echoed these concerns about a week later, downgrading Mexico’s rating to the lowest level of investment grade, adding that continued support for state-owned oil company Petróleos Mexicanos SA (Pemex) limits the government’s ability to control debt.
Mexico was the largest issuer in emerging markets last year, selling $41 billion in debt, primarily to support Pemex.
In January, the country sold $9 billion in dollar-denominated bonds and another $9.5 billion in euro-denominated debt.
Barclays, BNP Paribas, Deutsche Bank Securities, HSBC and MUFG are managing the operation.
Surce: reforma
