Alfa Sells $1 Billion in Bonds, Weighs Energy Investments

Alfa SAB (ALFAA), the Mexican food, auto parts and petrochemicals conglomerate, sold $1 billion of bonds and said it will use the proceeds to invest in its energy businesses and refinance debt.

The company sold $500 million of 10-year notes with an annual interest rate of 5.25 percent and $500 million of 30-year debt paying 6.875 percent, according to a statement today.

“We’ll use the proceeds mainly to finance projects in our energy business, to refinance existing liabilities and for other corporate uses,” Chief Executive Officer Alvaro Fernandez said in the statement.

Alfa’s energy unit, Newpek, posted the fastest sales expansion of its five divisions last year, bolstered by a growing U.S. oil and gas drilling business. The division is also poised to benefit from Mexico’s decision last year to break a state monopoly on oil and gas production, as the nation seeks to reverse almost a decade of declining crude output.

Newpek’s sales advanced 43 percent to $133 million last year, Alfa said in a statement last month. The unit’s earnings before interest, taxes, depreciation and amortization climbed 37 percent to $91 million.

Alfa, which has won service contracts with Petroleos Mexicanos, the Mexican state-owned oil company, said last month that Newpek’s prospects have improved with President Enrique Pena Nieto’s constitutional changes in energy law.

‘Mature Fields’

Newpek is “one of the few non-governmental companies in Mexico with experience in unconventional and conventional hydrocarbon formations, mature fields” and exploration and production services, San Pedro Garza Garcia, Mexico-based Alfa said last month.

Fitch Ratings, Standard & Poor’s and Moody’s Investors Service gave their lowest investment-grade rating to the Alfa notes.

Moody’s Baa3 rating “reflects Alfa’s ample geographic and business diversification that has proved to mitigate earnings volatility,” it said in a statement. The rating also accommodates the company’s plans to grow through mergers and acquisitions.

Fitch awarded the bonds a BBB- rating, as did S&P.

Alfa’s auto parts division, Tenedora Nemak SA, sold $500 million of 10-year bonds in February last year.

To contact the reporters on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net; Brendan Case in Mexico City at bcase4@bloomberg.net

To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Ben Livesey, Stephen West

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