Investors rushed on Monday to buy bonds in Mexico City-based retailer Controladora Comercial Mexicana SAB (Mexico: COMERUBC) after Issaquah, Wa.-based Costco Wholesale Corp (NASDAQ: COST) announced it was buying back the 50 percent stake of its local unit held by Comerci for 10.7 billion pesos ($769 million).
Comerci said it will use the money to pay down debt and position itself to compete better with Wal Mart de Mexico SAB (Mexico: WALMEXV). Yields on company debt due in 2018 declined 32 basis points to 6.99 percent, according to Bloomberg News, as investors saw more hopeful prospects for the troubled retail chain, one of the largest in Mexico.
Comerci is still digging out of its losses in the currency derivatives market, when it bet in 2008 the peso would rise right before the financial crisis knocked 20 percent off the value of the Mexican currency. The company subsequently defaulted on $1.5 billion in debt.