Slim Avoiding Original Sin Redux With Peso Bond: Mexico CreditKatia Porzecanski
America Movil SAB, the wireless carrier controlled by billionaire Carlos Slim, is seeking to exploit resurgent demand for emerging-market assets by selling the first Mexican peso bond overseas in eight months.
The company has hired banks to arrange investor meetings running through this week, according to a person familiar with the plan. Yields on Mexico City-based America Movil’s 22.5 billion pesos ($1.8 billion) of notes due in 2022 have declined 0.6 percentage point in the past month and fell to an 11-month low last week.
Emerging-market borrowing costs have plunged by the most in eight months as Federal Reserve officials pledge to hold rates near zero for a “considerable time.” The local-currency sale is also part of an effort by America Movil to reduce a dependence on foreign-currency borrowing dubbed the “original sin” after it led to defaults across Latin America in the 1980s, said Vaquero Global Investment LP. In the past year, the company sold $5.6 billion of debt in euros, British pounds, dollars and Swiss francs, data compiled by Bloomberg show.
“They always say the original sin of emerging markets is the inability to fund in their domestic currency,” Wilbur Matthews, the chief executive officer of Vaquero, said by phone from San Antonio.
America Movil hired Banco Bilbao Vizcaya Argentaria SA, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings Plc and Morgan Stanley to arrange the meetings, said the person, who asked not to be identified because the talks are private. Carlos Garcia-Moreno, America Movil’s chief financial officer, and Deputy CFO Ricardo Rivera will represent the company in the meetings, which began May 23 in Mexico, according to the person.
A press official for America Movil didn’t respond to requests for comment on the sale.
Ricardo Hausmann, a professor at Harvard University, called developing nations’ reliance on foreign markets the “original sin” in a 1998 article in Foreign Policy magazine.
The company last sold peso bonds abroad in February 2013, when it issued 7.5 billion pesos more of its securities due 2022. The initial offering of 15 billion pesos in November 2012 marked the biggest-ever international offering in local currency from Mexico.
The company issued more of the securities to improve trading, said Jennifer Gorgoll, who helps manage $2.1 billion of emerging-market debt at Neuberger Berman Group LLC.
“Illiquidity of the market is the biggest hindrance right now,” she said by e-mail. “But it will develop over time and will be a great way for investors to get exposure to local currencies as well as receive some pickup in yield.”
America Movil’s 2022 peso bonds yield 6.74 percent, or 3.25 percentage points more than the company’s similar-maturity dollar bonds. The peso has gained 1.7 percent this month, the most among major currencies after the South African rand. It slipped 0.1 percent to 12.8642 at 2:36 p.m. in New York.
Eduardo Cortes, who helps manage $1.6 billion of debt at GIA Partners LLC, including America Movil dollar bonds, said he’s unlikely to buy the peso securities because their performance is too dependent on swings in the exchange rate.
“I’m making a statement on the currency as opposed to making a statement on the credit,” he said in a telephone interview from New York. “That’s not the statement I want to put into my portfolio.”
The largest mobile phone-operator in the Americas by subscriber got 37 percent of its revenue from Mexico last year, more than any other country.
Moody’s Investors Service rates America Movil A2, the sixth-lowest investment grade and above that of the Mexican government. It shares the country’s highest ranking with Coca-Cola Femsa SAB.
“If anybody can borrow in the peso market, it’s America Movil,” Vaquero’s Matthews said.