Mexico Sells $1.5 Billion Bond to Pay for Iberdrola Plants

(Bloomberg) -- Mexico sold a $1.5 billion bond to pay off its purchase of power plants from Spain’s Iberdrola SA.

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The government priced the 2041 dollar notes at par at a yield of 7.25%, down from initial price talks of around 7.625%, according to people familiar with the matter who asked not to be identified. The proceeds will be used to repay a bridge loan that helped finance the $6.2 billion purchase of the Iberdrola power plants, which President Andres Manuel Lopez Obrador framed as a plan to give the government control of electricity generation nationwide.

The debt, rated investment grade from the three largest credit agencies, was issued by Fiemex Energia, a private-sector vehicle structured by the government. Barclays, Banco Bilbao Vizcaya Argentaria, Santander, and SMBC Nikko, the banks that issued the bridge loan, are acting as bookrunners.

The government last month sold $852 million of equity in the plants to local buyers.

Foreign investors, meanwhile, have been dumping the Mexican peso and stocks since Lopez Obrador’s party — and hand-chosen successor — won national elections in a landslide. That victory opened the door for sweeping changes, some of which have already passed the lower house of the legislature.

In this sale, the indenture and the notes will be governed by New York law, while other collateral documents will be governed by the laws of Mexico, according to the people.

(Updates with pricing details throughout.)

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