Citigroup Tops BBVA in Mexico as Peso Bond Offerings Slow to Six-Year Low

Mexico is having the slowest year for domestic corporate bond sales since 2004, spurring underwriters including Citigroup Inc., Banco Santander SA and BBVA Bancomer SA to slash fees in a “war” for fewer deals.

Grupo Televisa SA, the world’s biggest Spanish-language broadcaster, and America Movil SAB, the largest wireless telephone company in Latin America, were among companies that held 55 debt offerings totaling $11 billion since Jan. 1, the least since 69 deals six years ago, according to data compiled by Bloomberg.

Peso bond sales are falling as local investors spurn companies with all but the best credit ratings, said Alejandro Portales, Santander’s deputy director of fixed-income syndicates in Mexico City. Lower-rated companies are seeking financing overseas and local underwriters have cut fees about 34 percent this year, Bloomberg data show.

“There has been a war among the banks for the few deals,” said Ricardo Cano Swain, managing director of debt capital markets at BBVA Bancomer, a unit of Bilbao, Spain-based Banco Bilbao Vizcaya Argentaria SA. Since 2008, fewer companies have offered debt and in smaller amounts, he said in an interview.

The average peso bond underwriting fee has fallen to 0.370 percent this year from 0.563 percent last year, according to data from Bloomberg. The number of companies underwriting these securities in Mexico has fallen to 12 from 20 in 2007.

Lower Fees

“The fight over new issuances has become more serious, more intense,” Eduardo Estrada, head of fixed-income trading at Corporacion Actinver SAB, which manages about $5.5 billion in fixed-income assets, said in an interview from Mexico City. “This has caused fees to go lower and lower and lower.”

Televisa led the rankings with the largest domestic bond sale in 2010. The Mexico City-based company, rated AAA by Standard & Poor’s on a national scale, sold 10 billion pesos ($809 million) of bonds due in 2020 to yield 7.38 percent. Santander and HSBC Holdings Plc underwrote the sale, which was Televisa’s largest in the local market.

America Movil, controlled by billionaire Carlos Slim, sold 14.9 billion pesos of debt maturing in five years to 15 years in three parts with Citigroup’s Banamex unit, Santander and Grupo Financiero Inbursa SAB on March 3.

Petroleos Mexicanos, Latin America’s largest oil producer, issued 15 billion pesos of bonds in three offerings on Feb. 4, including floating-rate five-year notes, fixed-rate 10 year bonds and inflation-linked bonds. Standard & Poor’s rates Pemex, as the company is known, AAA on a national scale.

Banamex Leads

Citigroup’s Banamex, which is Mexico’s second-largest bank by outstanding loans, is set to beat BBVA Bancomer, Mexico’s leading lender, as the nation’s top peso debt underwriter for the second year in 2010, according to data compiled by Bloomberg. The bank has underwritten $2.4 billion of peso debt in 2010, for 22 percent of the market, compared with $1.8 billion for BBVA Bancomer, which has 18 percent of the market.

“There’s appetite for good paper from high quality issuers,” said Luis Miguel Rodriguez, head of financial planning with Banamex, in a telephone interview. Rodriguez declined to comment on Banamex’s underwriting business.

BBVA Bancomer is trailing after cutting fees to an average of 0.357 percent in 2010 from 0.437 percent the previous year, according to data compiled by Bloomberg.

Banamex trimmed underwriting fees to 0.396 percent from 0.418 percent. BBVA Bancomer was Mexico’s leading underwriter in 2008, when it managed $4 billion of debt sales, or 26 percent of the domestic corporate bonds issued that year.

Gaining Share

Santander and HSBC’s Mexico unit have gained market share after reducing fees. Madrid-based Santander is Mexico’s No. 4 underwriter and has captured 18 percent of the market, up from sixth place in 2009 when it underwrote 7 percent of issues. Santander has charged an average fee of 0.248 this year, compared with 0.546 last year, according to data compiled by Bloomberg.

HSBC, based in London, has jumped ahead of BBVA Bancomer to second place this year, underwriting 21 percent of the offerings, after coming in third in 2009. It has trimmed fees to 0.465 percent in 2010 from 0.726 percent the previous year. Wolfgang Erhardt, a spokesman for HSBC in Mexico, didn’t return calls for comment.

“I would hope fees don’t fall anymore,” said Francisco Hernandez, director of debt capital markets with Deutsche Bank in Mexico City. Fees will likely be little changed in 2011, he said.

Of the top 10 corporate bond sales this year, all of the companies had investment-grade credit ratings from Standard & Poor’s, according to data compiled by Bloomberg.

Lower-rated companies have chosen to sell abroad where investors have greater risk appetite, Portales said.

Lower Ratings

“Issuers that aren’t rated AAA have had greater difficulty in going to the market,” Portales said.

Corporacion Geo SAB, the Mexican homebuilder, sold $250 million of 10-year bonds abroad to yield 9.5 percent in the U.S. in June. Both Standard & Poor’s and Moody’s rate the issuance three levels below investment grade.

The Mexican domestic market “tends to focus on the investment-grade companies,” said Jose Coballasi, an analyst with Standard & Poor’s in Mexico City. “The international market has more depth. There are investors in the international market that specifically look at below-grade companies.”

Higher bank lending this year has also lessened Mexican companies’ need to seek financing in domestic debt markets, Deutsche Bank’s Hernandez said.

Santander’s Portales said that while the number of issues has dwindled, top-rated companies have been able to sell larger amounts of debt so the total bonds sold this year will surpass 2009, when companies sold $11 billion of securities. Underwriters that can sell the securities to a diverse group of investors and also offer a low fee have the upper hand, he said.

To contact the reporters on this story: Jonathan Roeder in Mexico City at jroeder@bloomberg.net; Andres R. Martinez in Mexico City at amartinez28@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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