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12-07-2012 21:34:00

Mexico's BBVA Bancomer Places $1 Billion in 10-Year Notes

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MEXICO CITY--The Mexican unit of Spain's Banco Bilbao Vizcaya Argentaria SA (BBVA, BBVA.MC) said Thursday it has placed $1 billion in 10-year notes that yield 6.75%.

BBVA Bancomer, Mexico's largest bank, said the offer was 3.5 times oversubscribed and that investors in Asia, Europe, Latin America and the U.S. participated in the deal.

The notes priced at the bottom of the price range floated in the market, the bank said, without giving the price.

The offering was of lower tier II bonds, meaning the debt sits low in a bank's capital structure to serve as a cushion of capital for senior bondholders. This makes them riskier investments, but they yield more to compensate investors.

Nearly $23 billion of subordinated bonds have been sold by financial institutions so far this year, outpacing the $18.3 billion sold in 2011, according to research company Dealogic. The continual drop in interest rates has made it more attractive for banks to bolster their capital through issuing subordinated bonds.

Foreign institutions that need dollar-based funding have accounted for 60% of 2012 issuance, according to Dealogic, whereas U.S. banks tend to be flush with deposits.

BBVA Bancomer said the bond sale will help it continue to extend credit, thus further contributing to Mexico's economic growth.

The bank expanded its credit portfolio in Mexico last year by 9% to 609.7 billion pesos ($45.33 billion).

BBVA Bancomer is a major source of profit for its Spanish parent. In the first quarter, Mexico accounted for 430 million euros ($527 million) of BBVA's EUR1.01 billion net profit, while Spain only supplied EUR229 million.

-Patrick McGee contributed to this article.

Write to Amy Guthrie at amy.guthrie@dowjones.com

(END) Dow Jones Newswires

July 12, 2012 15:34 ET (19:34 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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