Mexico’s State Power Company Wants to Borrow Up to US$1.2 Billion at Home, Some of It for Forty Years
Mexico's state power company is preparing to sell up to 20 billion pesos, about US$1.2 billion, in three bonds at once, one of them running forty years. The post Mexico’s State Power Company Wants to Borrow Up to US$1.2 Billion at Home, Some of It for Forty Years appeared first on The Rio Times .
Mexico's state electricity company, Comisión Federal de Electricidad (CFE), is preparing to issue three bonds in its domestic market. The combined bond issuance could reach up to 20 billion pesos, equivalent to approximately US$1.2 billion, based on the exchange rate of 16.95 pesos to the dollar. The bonds come with varying maturities and different mechanisms for repayment.
One bond has a duration of three years, paying a floating rate tied to the overnight funding reference rate determined by Mexico's Bank of Mexico. Another bond runs for ten years and pays a fixed rate twice per year, attracting pension funds and insurance companies who prefer known coupon payments. The third and most noteworthy bond offers a forty-year maturity and is denominated in UDI, a unit published by the central bank that adjusts with inflation.
This bond's coupon is fixed in real terms, representing a base percentage plus any inflation that may occur. This forty-year bond would represent a record for a Mexican corporate borrower and sets a new standard for the country's debt market. Whether or not these bonds will be issued depends largely on the willingness of domestic pension funds to invest in long-term securities, as they are the only entities with the ability to hold bonds of this length.
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