The Government of Mexico issued sustainable bonds for an amount of US$2.2 billion, with a 10-year term and a coupon rate of 4.875 percent.
Through a press release, the Mexican Government highlights that 1.8 billion dollars came from raising new resources that will be used to prepay a bond with an original maturity date in January 2025. The other 400 million came from a liability management exercise.
"The transaction reached a demand of 6.987 billion dollars, equivalent to 3.2 times the amount issued, and 233 global investors participated in it, which shows the confidence of investors in Mexico," the bulletin states.
For sustainable projects
The bonds issued by the Ministry of Finance for US$2.2 billion are in addition to the US$2 billion issued in September 2020 and July 2021 in the euro market.
The Government of Mexico communicates that an amount equivalent to the total amount issued will be allocated to sustainable projects, which are the eligible expenditures for the current year, as provided for in the SDG-linked Sovereign Bonds Framework, and following the guidelines of the Sustainable Bonds published by the International Capital Market Association (ICMA).
"In this way, the Government of Mexico reaffirms its commitment to develop the bond market with ESG criteria and to promote sustainable financing," the statement said.
It is worth noting that the dollar-denominated bond with original maturity in January 2025 will be repurchased in the following weeks, which will reduce redemptions of foreign currency-denominated bonds during the first year of the next administration by 43 percent.
"It is worth noting that the price at which said bond will be repurchased will become the lowest repurchase price since the Federal Government began implementing this refinancing measure in August 2016," the Mexican Government states.
With this transaction, investors were able to exchange their long-term bonds for a new 10-year ESG benchmark, while the Federal Government was able to provide greater liquidity to the new sustainable bond without the need to incur additional debt, according to the Ministry of Finance.
It also generates a deleveraging effect due to the price differential, since long-term bonds were trading at a significant discount in the secondary market, so the amount of amortizations that Mexico will pay between 2034 and 2061 was reduced by US$83 million.
Source: Secretary of the Treasury
