MEXICO CITY (Reuters) - A three-part sterling and euro hybrid bond that Mexico’s America Movil (AMXL.MX) announced on Monday is aimed at preserving the company’s credit rating and not linked to any particular pending deals, according to Chief Financial Officer Carlos Garcia Moreno.
The issue by billionaire Carlos Slim’s telecoms giant, totaling 1.45 billion euros and 550 million pounds sterling, is part of a wider strategy to substitute short-term paper for longer-term debt, Garcia Moreno told Reuters in a telephone interview.
It is “optimization of our balance to bring us back to the leverage levels ratings agencies have fixed for our rating,” he said. “We had exceeded the range in late June, and all we are looking for is to return within that range.”
“The intention is not to use (the money) for anything else,” he added, when asked if the issue was aimed at raising funds for America Movil’s proposed 7.2-billion-euro buyout of Dutch telecom KPN (KPN.AS) or another European transaction.
Some analysts have voiced concern about the specter of a potential rating downgrade if the KPN bid was funded with debt and skews its debt/EBITDA ratio, which is a critical metric for ratings agencies.
Shortly after the KPN bid was announced, ratings agencies put America Movil on watch for a possible downgrade.
“America Movil is a company that cares a great deal about its ratings and wants to keep them, and will do all it can to do so,” Garcia Moreno said.
He said America Movil would be able to call the bonds early if it wants after an initial period of between 5-10 years depending on the tranche, but said if the rates remained attractive in future, the company could opt to keep the debt going forward.
“Nominally these instruments have a maturity of 60 years, but you can call them early,” he said.
America Movil, Latin America’s largest telecom company, threatened on Friday to abandon its bid for KPN saying it has no plans to raise its offer, after a foundation representing KPN told the Mexican firm to improve its proposal or face a veto.
America Movil bought 30 percent of the KPN last year as it expands its business outside its main Latin American market at a time when it faces increasing regulatory pressure at home.
The company offered to buy the 70 percent of the Dutch telecoms firm it does not own last month and has since said that its financing for the bid was in place.
However, it could also walk away from KPN altogether if the bid fails, Slim’s son-in-law Arturo Elias told Reuters last week.
Shares in America Movil rose 0.7 percent to close at 12.95 pesos a share on Monday. The shares are down around 13 percent year-to-date, while Mexico’s IPC share index .MXX is down around 8 percent so far this year.
Editing by Peter Cooney, G Crosse