The Inter-American Development Bank (IADB) has become the first international issuer to launch a global bond denominated in Mexican pesos, thereby offering a new asset class for domestic and international investors.
The Ps3bn global issue denominated in Mexican pesos (around US$269mn) is the first international bond issue made available in the domestic capital market under the new financial regulatory framework adopted by Mexico last year. It is documented under the bank’s standard Global Debt Program. It is also the first AAA-rated bond issue in the domestic capital market.
The three-year bonds pay a semi-annual coupon of 6.59% and were priced at 100% of face value, and they mature on March 27, 2007. The proceeds, swapped into US dollars, will be used by the IADB for its lending programme for the economic and social development of Latin America and the Caribbean. The issue is also expected to contribute to the development of capital markets in Mexico.
This transaction is a sign of the important progress that local Mexican markets have achieved in the past few years. The local currency yield curve has been considerably extended and the liquidity in the market has broadened, both of which have contributed to the success of this transaction.
“The IADB and Mexico have simultaneously achieved financial and developmental objectives with this historic bond issue,” comments IADB president Enrique Iglesias. “For the IADB, raising funds for the first time in the domestic capital market of a Latin American country represents a diversification and deepening of its investor base, at costs comparable to that of our international bond issuance. For Mexican investors, there are advantages of diversification in having available a AAA-rated security denominated in local currency. Holding assets denominated in national currency avoids currency exposure for investors with liabilities mostly denominated in that currency.”
The lead manager of the sale was Citigroup Global Markets, while the local placement agent was Acciones y Valores de Mexico, a member of the Grupo Financiero Banamex.
The IADB expects to raise a total of around US$6bn on international debt markets during 2004.