MEXICO CITY — Mexico’s leading department store network El Puerto de Liverpool has launched a road show to raise $300 million to $500 million through a 10-year dollar bond to pay down debt as it continues to boost expansion.
“They have launched the road show in New York,” said the debt research director at a major Mexican bank, echoing views that the sale will be highly coveted. “This is a very high-quality issuer. Investors are so eager for paper that, given how good this company is, there will probably be a fight for it.”
The banker said Mexico’s largest department store chain hopes to raise $500 million through underwriters Merrill Lynch and Citi. Global investors’ enthusiasm with high-yield emerging market corporate debt will also help stoke interest, she added.
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Sandra Tinoco, an analyst at Standard & Poor’s, agreed the transaction will do well.
“This is a very good name in Mexico” with a strong debt profile, she said, adding that the dollar note will be the first of its kind issued by Liverpool, which has so far raised debt in the local market.
“It’s a good opportunity to raise the company’s profile in the international community,” Tinoco said.
She added the funds will be used to refinance 4.5 billion Mexican pesos, or $338 million at current exchange, in local Liverpool notes due in December.
Despite rumors of a $500 million sale, Tinoco said the firm has so far indicated plans to garner $300 million. She added the road show will likely finish next week.
Liverpool did not return calls seeking comment.
S&P earlier this month upgraded Liverpool’s rating to “BBB+”, giving it a stable outlook. It said Liverpool “has been able to maintain solid cash flow generation” and stable operating margins despite a sluggish Mexican economy and more cautious consumer spending in a highly competitive retail market.
The Mexico City-based firm, which has waged a major expansion since 2011, has 17 billion pesos, or $1.3 billion, in liabilities and a low debt-to-earnings before interest, taxes, depreciation and amortization ratio of 0.5 percent.
Publicly-traded Liverpool is set to open 10 stores by 2016, eight of its dominant Liverpool format and two for its Fabricas de Francia operation, spending as much as 6.5 billion pesos, or $489 million, in the process, Tinoco said, adding that the firm should close 2015 with roughly 110 stores.
Liverpool’s earnings should grow in the high-single-digits in 2014 and 2015 (with same-store-sales rising 5 to 6 percent), outstripping the sector’s average low-to-mid single digit growth for the same period, Tinoco said.
According to S&P, Liverpool’s “solid bargaining power and favorable store locations,” coupled with its growing customer credit operation, will help it cruise ahead of competitors. This is despite a slowing Mexican economy, expected to grow 2.5 percent this year, down from earlier expectations of more than 3 percent.