Bond Traders in Europe Make Pemex Pay Up While Sparing Slim Pain

  • Pemex sold euro bonds after reporting $32b loss last week
  • American Movil has doubled its cash since the end of 2013

Forays into Europe’s bond markets this week by America Movil SAB and Petroleos Mexicanos underscore the diverging fortunes of Mexico’s two-biggest foreign-debt issuers.

With plunging crude prices and production wreaking havoc on Pemex’s finances, the state-owned oil company paid 3.22 percentage points more to sell seven-year euro-denominated notes Wednesday than when it last issued similar debt in April. By contrast, America Movil, rated just one level higher by Standard & Poor’s at A-, sold 12-year euro bonds at 150 basis points above the mid-swap rate on Monday. That’s in line with the 135 basis-point spread the wireless carrier paid to issue 10-year euro notes in 2013.

While Pemex’s record debt is prompting the company to slash spending, billionaire Carlos Slim’s America Movil has more than doubled its cash in the past two years to 101.5 billion pesos ($5.7 billion), boosting confidence among bond investors. Mexico City-based Pemex issued its notes a week after reporting an unprecedented $32 billion loss for 2015. While the government has signaled it may step in to bolster the cash-strapped producer, investors are still concerned about Pemex’s future, said Joe Kogan, head of emerging-markets strategy at Bank of Nova Scotia.

“Certainly there was a time when both of those seemed like really safe credits,” Kogan said by telephone from New York. “That’s probably still true for America Movil. But, Pemex has changed quite a bit.”

Pemex sold 1.35 billion euros ($1.48 billion) in three-year notes to yield 3.95 percentage points more than the mid-swap rate and 900 million euros of seven-year bonds at a spread of 4.95 percentage points. On Monday, Mexico City-based America Movil issued 850 million euros of securities due in eight years to yield 1.56 percent and the 650 million euros of 12-year notes that yield 2.27 percent. The yield on the notes due in 2024 climbed to 1.64 percent as of 7:38 a.m. in New York on Thursday.

"Markets have been so uncertain and volatile this year, and we saw a good window with great rates," Carlos Garcia-Moreno, the chief financial officer of America Movil, said in a phone interview. "With this issuance, we have no need to seek market financing in at least 15 months."

America Movil will cut debt by approximately $3 billion this year and expects to reach a net-debt-to-Ebitda ratio of 1.5 times between the end of this year and the start of 2017, from 1.8 times at the end of December, according to its last quarterly report. The telecommunications giant has no "material" plans for acquisitions or to increase its stake in any of its holdings, Garcia-Moreno said.

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