Mexican white goods producer, Controladora Mabe, S.A. de C.V., which is 48% owned by General Electric of the U.S., sent investors a red herring recently to market its $150 million five-year average, seven-year final, future flow securitization in the traditional private placement market.
It is fitting that one of the last corporate issues of 1999, a year in which only the most carefully crafted of emerging markets transactions have passed muster, is employing a future flow structure and targeting the private market's investor base.
"You haven't seen anybody coming out with new issues in the public market," said one banker specializing in Latin American private-placements. "Maybe a new issue could be supported [in the public market] but it would only be possible with a really strong credit and it would probably be a high-grade." Nevertheless, even in the private market, deals must be structured just so, she added, incorporating either a securitization structure, a multilateral credit enhancement, or a strong foreign sponsor.
Mabe's deal, which is being lead-managed by ABN Amro and has been given a preliminary rating of Baa2 from Moody's and triple-B from Standard & Poor's, has got two of those bases covered. Not only does GE own almost half of the company, the sponsor has signed a contract guaranteeing that it will purchase gas ranges from Mabe until the year 2011. The dollar revenues from sales under this contract provide the backing for the bonds
"We're viewing it as being a pretty attractive deal," said one private placement investor who frequently looks at Latin transactions. "The support from GE seems to be quite strong and we're very interested in [the trade]."
As crossover accounts steadily move back into emerging markets debt, issuers are finding the tight pricing, attainable through securitizations and the private market quite attractive. "It's just a matter of cost," said an official at Mabe. "Bancomex's [Mexico's premier lender] loan rates are not very low and it is not the time to be in the open market right now."
Mabe was also attracted to the private market because of the confidentiality it offered, said an analyst. The company remains privately held and is very guarded in disclosing information, he said. A number of Mexican families, including the Berronda family, control the company, which operates subsidiaries in Brazil and Argentina.