NEW YORK, Sept 6 (IFR) - In its second market foray of the
week, America Movil, A2/A-/A, returned Thursday to tap
another niche market, this time raising USD750m through a
The issuer hit the sweet spot for investors seeking a hedge
against US rate volatility and getting in ahead of a potential
USD30bn trade from Verizon that has already forced a
sell-off in the telecom sector.
Floaters are scarce in Latin America, with just a handful of
credits tapping this market in recent years, including Santander
Chile and Petrobras.
For the blue-chip Latin American telco, the economics made
sense given the steepening of its curve in recent weeks as its
EUR7.2bn takeover bid for Dutch telco KPN unnerved the
buyside and rating agencies that have put the credit on negative
America Movil's short-dated bonds have ground tighter even
as the long-end sold off, making a tap in this part of the curve
Starting with initial price thoughts of three-month Libor
plus very low 100s, the borrower proceeded to set the spread at
100bp over and print at par. Against the company's short-dated
fixed rate bonds, bankers were calculating a premium of anywhere
between 5bp and 22bp with the Z-spread on the 2016s being
spotting at between 78bp and 95bp.
Conversely some bankers took the outstanding 2022s as a
starting point and worked backwards. One calculated a new
10-year coming at Treasuries plus 200bp and a three-year at
150bp, though the steepness of America Movil curve with an
approximately 80bp differential between 3s and 10s may put a new
three-year fixed closer to 120bp.
Either way, the pricing and timing arguably made good sense,
given the uncertain backdrop.
"There is a bunch of liquidity at the short-end and for a
three-year floater they'll be paying about 1.25% for the
lifetime of the bond," said a banker.
Demand peaked at a relatively modest USD1.5bn with some 75
accounts participating, though floaters are not known for their
excessively large books. "There are only a small core group of
investors that look at the front end, even less for floaters
with a three-year tenor, but for America Movil they get a better
bid from the high-grade buyer base accustomed to three-year
From the perspective of investors that play this market, a
finish of 100bp over Libor arguably looked attractive against
Z-spreads on other major telcos. For instance, Vodafone's
2015s and 2016s were trading with a Z-spread of 60bp and
70bp respectively, while BT's 2015s were at 60bp,
Deutsche Telecom's at around 86bp, AT&T's 2016s in the
high 50s and Verizon's 2016s at 80bp.
Demand was mostly driven by US investors but LatAm and
European accounts were also seen participating. Joint
bookrunners were Citigroup, BBVA and Banca IMI.
The latter bank was seen an unusual choice to take a leading
role in this trade given its inexperience in LatAm deals such as
this one, but it is thought that the Italian bank was benefiting
from reciprocity rights given its participation in recent loans.
Co-managers on the trade included Mizuho and Mitsubishi UFJ