Data from the Mexican Stock Exchange (BMV) indicate that despite the high interest rate in Mexico, long-term corporate debt issuances set a new record in the first quarter of the year, with the amount raised rising 174% compared to to the same period of 2022.
Between January and March of this year, companies obtained financing for 57,458 million pesos compared to 20,984 million pesos raised in the same months last year, according to information from the stock exchange.
Although it is not the best time to issue debt in the stock markets, refinancing needs lead companies to seek resources, said Jorge Arce, president of HSBC Mexico.
“There is an appetite for investors to buy at a fixed rate and less for companies due to high yields, but when they have refinancing needs they will have to go out and look for resources,” the manager commented in an interview.
He explained that in the local part there is an appetite for financing, but the one that issues wants a floating rate to adjust it over time and the one that takes the paper seeks a fixed rate to ensure the prize.
After acknowledging that it is not the ideal time to issue debt, there are still good opportunities and bank credit, for example, is also very active.
The representative of HSBC highlighted that a proof of the appetite for debt is that in the first quarter of the year the placements were record in amount in relation to the same three months of the previous year.
“Despite the high interest rates, the projects have an internal rate of return that is higher than the cost of the debt and that will make the issues viable,” said Jorge Arce, head of HSBC in Mexico.
still attractive
“The first quarter of 2023 marked a record and we saw that mainly banks had a significant reactivation in the market, we also saw corporations,” said Juan Manuel Olivo, director of Promotion and Issuers of the BMV Group.
He highlighted that the issues of thematic debt or under the green, sustainable label and linked to sustainability were also relevant, with issuers such as the BBVA bank, the Pacific airport groups (GAP) and the North Center (OMA), as well as Fibra Uno .
The director of the Mexican Stock Exchange explained that this type of debt linked to sustainability has had significant growth in recent years, to such an extent that currently practically one in two pesos is being financed in the stock market in Mexico. already has an ESG label.
Of the total amount raised during the first quarter of this year on the Mexican Stock Exchange, 37.620 million pesos corresponded to green, sustainable bond offerings, as well as those linked to sustainability.
When asked Juan Manuel Olivo why companies are issuing now that interest rates are high in Mexico (they are located at 11.50%), he replied that it reflects the need to finance projects that are attractive because they promise an “attractive” rate of return.
“The projects that exist in our country continue to be sufficiently attractive so that paying the new rates that if we compare them with previous years may seem high, but they continue to be profitable projects, they offer the ability to have profitability and pay the financing source with these conditions”, commented Manuel Olivo.
Mainly, the resources raised by companies, banks and development banks in these first three months have been used to pay debt and finance growth projects, as established by the issuers in their respective placement prospectuses.
Among the broadcasters that obtained the greatest amount of resources with the debt placement are BBVA, with 14.820 million pesos; América Móvil, the telecommunications business company, with 12,446 million pesos and Banco Nacional de Obras y Servicios Públicos (Banobras), with 10,000 million pesos.
Banorte expects 21.100 million pesos to be placed this month, preferably in high-quality, unsecured bonds and that the offers be made in the last part of the month.
in three sections
The CFE will issue bonds for 7,000 million pesos
The Federal Electricity Commission (CFE) will issue medium-term bonds, three, five and ten years for 7,000 million pesos in the local market.
The second quarter of this year anticipates another good start because there are requests for close to 19,000 million pesos, with issuers such as the CFE itself.
In a report last January, its most recent report on the energy sector, the risk rating agency Fitch Ratings highlighted that policies are required to promote development and investment in that sector.
“Surely it will be a second quarter as good as the first, in terms of activity and emissions. The amount will have to wait a bit for the supply and demand itself to accommodate the investment portfolios”, said Juan Manuel Olivo, Director of Promotion and Issuers of the BMV Group.
Jorge Arce, president of the HSBC México bank, highlighted that the federal government and the State productive companies are excellent issuers.
He explained the case of Petróleos Mexicanos (Pemex), which has the full support of the federal government and is also presenting its environmental principles to investors.
The CFE debt issuance will be divided into three tranches. One for 12 months with the TIIE-28, another for seven years with a fixed interest rate and another for 10 years in udis. The conflict in Russia and Ukraine led to the price of natural gas facing volatility, which affected CFE’s operating margins.
