May 20, 2019 / 8:18 PM / 7 months ago

América Móvil prepares for loan market return, seeks at least US$2.5bn

NEW YORK, May 20 (LPC) - Mexico’s América Móvil is scouting lenders to refinance at least US$2.5bn in revolving credit facilities maturing this August, according to three banking sources, preparing a comeback to the Latin American bank market, where it has not issued debt since 2016.

The telecommunications provider’s request for proposals (RFP) to lenders comes after fellow Mexican investment grade borrower, oil producer Petróleos Mexicanos (Pemex), last week launched an unprecedented US$8bn loan to handle its own looming debt maturities.

América Móvil’s potential transaction, alongside Pemex’s jumbo financing, is a welcome shot in the arm for Latin American lenders, after a 44% slump in syndicated loan issuance to US$7.1bn in the first quarter of 2019 versus the year-ago period, according to data from LPC, a unit of Refinitiv.

While Brazilian credits soaked up the bulk of available liquidity throughout the first quarter, Mexican lenders took time out to weigh what impact new President Andrés Manuel López Obrador’s measures, including the cancellation of a US$13bn airport project and pushback on energy reforms, would have on the market before pressing ahead with billion-dollar sized deals.

A series of smaller-sized loans for Mexican borrowers have kept bankers busy, but Pemex together with América Móvil present the first opportunity for big-ticket foreign currency corporate financing in Mexico this year, the three bankers said.

The Carlos Slim-owned telecom, rated A3/A-/A-, has not tapped the dollar- or euro-denominated syndicated loan market in three years, according to LPC, but its status as a Latin American blue chip borrower is sufficient enough to garner demand at a favorable price.

“América Móvil is the cream of the crop in Mexico,” said one of the three senior bankers. “Pricing will be so low, it’s going to be painful,” the banker said of the low spread over Libor, and minimal fees, that América Móvil typically commands.

The company’s US$2bn-equivalent five-year loan in euros, signed in 2016, and its US$2.5bn five-year revolving credit facility from August 2014 paid just 45bp over Euribor and Libor, respectively. A new dollar deal is expected to offer similar spreads, sources said.

“(Lenders) are listening to the biggest bond issuer in Mexico,” said a second banker of América Móvil, adding that a deal in the same window as Pemex brought “the (two) biggest issuers in Mexico” to market at the same time.

Oil producer Pemex, rated Baa3/BBB+/BBB-, in comparison is expected to pay 235bp over Libor for a five-year bank facility.

REGIONAL BENCHMARK

América Móvil has forged some of the strongest relationships with banks active in Latin America. As many as 20 lenders have been invited to participate in the refinancing, the sources said, and the company, known for its tough negotiation skills and dominance in the telecom space, is poised to extract strong demand.

“(América Móvil) is number one or two in Latin America, they set the tone for what’s going on in the market,” said Sul Ahmad, an associate director for Fitch Ratings.

The company, while absent from the bank market for three years, is also moving to deleverage. Adjusted debt to Ebitda is forecast to be below 2.5 times over the next 12-18 months, Moody’s Investors Service said in a report on April 15, from approximately 2.6 times at the end of 2016.

The company also reported a first quarter net profit of roughly US$1bn in April, up 3.6% from the year-ago period. Despite its absence, however, the company has returned in force to the capital markets throughout 2019.

Alongside an RFP to refinance bank debt, the company ended a five-year hiatus in the dollar-denominated bond market with a US$2.25bn transaction in April and announced plans this week to meet with investors about a potential euro-denominated bond sale.

América Móvil also boosted its market share in March when it agreed to pay US$905m for Nextel Brazil from fellow mobile telecommunications provider NII Holdings and AI Brazil Holdings.

“Their operating scale, diversification and deep pockets are all competitive advantages,” said Ahmad. (Reporting by Aaron Weinman and Michelle Sierra. Editing by Lynn Adler and Jon Methven)

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