(Bloomberg) -- The retail arm of Mexican billionaire Ricardo Salinas’ Grupo Elektra tapped global markets for $350 million to pay back existing notes that faced the risk of a rating downgrade that would trigger early repayments.
Nueva Elektra del Milenio sold the dollar-denominated notes due in October 2031, according to people familiar with the matter. The yield was 12.5%, in line with initial price talk, said the people, who asked not to be identified because they’re not authorized to speak publicly.
Proceeds will be used to refinance $325 million of existing notes due in 2028, according to the offerings documents. BCP Securities and Jefferies handled the sale.
Both the new and existing bonds are backed by the remittances sent to Mexicans and received at Elektra stores. Some 50% of those remittances, which are expected to reach around $65 billion this year, are collected at the stores, according to the company.
“The fundamentals around remittances from the US to Mexico continue to be strong,” said Ian McCall, a managing partner at First Geneva Capital Partners. “The structured nature of this bond places investors right at the head of the payment queue seeing their reserve accounts funded and their bonds serviced before any money flows to the issuer.”
According to the 2028 bond documents, if Fitch Ratings downgrades the notes to BB- or below, the principal would become due. The firm cut Elektra’s rating to BB in March, just one notch above that level, citing concerns about corporate governance practices at Grupo Salinas.
Under the preliminary indenture of the new notes, only rating downgrades by S&P Global Ratings or Moody’s Ratings to B- and B3, respectively, or below, would trigger early repayment, according to the document reviewed by Bloomberg.
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