Ricardo Salinas. — Bloomberg
NEW YORK: Bonds from Mexican billionaire Ricardo Salinas’ telecom Total Play Telecomunicaciones soared to the highest in a year, days after the Internet and cable provider launched a debt exchange offer that investors say is a crucial step towards rebuilding its reputation with the market.
Total Play’s bonds due in 2025 jumped 17 US cents to trade at 77 US cents on the US dollar on Tuesday, according to Trace data, as bondholders warmed to a company’s offer to swap the outstanding notes for new ones due in 2028.
The offer is open to holders of about US$362mil of the debt. The remainder was already exchanged in a private deal, the company said last month.
The rally in the bond market and existing Total Play notes due in 2028 have also gained, marking a reversal for the closely held Salinas company, which had been dogged by concerns that capital expenditures would eat up free cash flow, putting its ability to pay the 2025 note in question.
A successful exchange will give the company breathing room.
“They’re proving the sceptics wrong,” said Ben Hough, at BCP Securities, who had put a speculative buy rating on the 2025 bonds in late February when they were trading at 54 US cents on the dollar.
“The exchange should provide a runway for earnings before interest, taxes, depreciation and amortisation, and capital expenditure come into balance.”
The new offer was launched on the Singapore exchange, where the secured, amortising notes due in 2028 that pay a 10.5% coupon will trade, the company said.
The company has yet to release audited financial statements for 2023, which executives in a late February earnings call said was necessary to launch the public bond exchange offer.
There are also questions about how the new notes will be collateralised, BNP strategist Alexis Panton wrote in a note.
A representative for the company didn’t reply to a request for comment.
For now, though, the market is rewarding those who stuck with the trade as the debt fell into distressed territory.
Total Play had become an “easy name to dislike”, said Ian McCall, a managing partner at First Geneva Capital Partners, which advises on US$225mil in emerging market investments and piled into the 2028 bonds as they sank over the past year.
“This exchange removes the biggest risk,” he said. “If they continue executing as they have over the next couple of years and maybe begin to de-lever, that could really change people’s perspective quite meaningfully.” — Bloomberg
