Capitalizing on low domestic interest rates and peso strength, Mexican retail conglomerate Elektra has issued a securitization designed to wipe out dollar-denominated debt. The company will use proceeds from a Ps2.6 billion (US$235 million) deal backed by fees on electronic money transfers to call a US$275 million bond maturing in 2008. "It was becoming very costly for the company," said Rolando Villarreal, head of investor relations at Elektra. "When we buy it back, we'll have no dollar debt."
Maturing in 2012, the new peso deal priced at 250 basis points over the six month TIIE, which currently translates to about 8.7% a year. The foreign bond headed for retirement was costing the company an annual 16% in pesos, factoring in the expense of exchange rate hedging. The 2008 bond has a call option that kicks in next month. Warburg Dillon Read, Credit Suisse First Boston and ABN Amro jointly issued that deal in 2000.