Televisa (TV)—the Mexican media conglomerate—was contemplating the issuance of peso-denominated Euro-notes. It would be the first such issue by a Mexican corporation in a market that was barely three years old. On October 2006, Televisa was upgraded by Standard & Poor’s from BBB to BBB+ in its Global Scale. Local Scale grade remained AAA. Televisa’s funding options included:

■ Peso-denominated 8. 49 percent senior unsecured Euro-notes due 2037.

■ U.S. dollar–denominated long bond issued in U.S. capital markets as a 144A Reg. S. The bonds would have a maturity of 30 years and would be issued at a spread over the 30-year Treasury bond of 150 basis points. The Treasury rate at the time was trading at 4. 836 percent, which resulted in an all-in rate of 6. 336 percent for TV. The swap to pesos represented a spread over the 30-year Mexican treasury of 121 basis points (bps), 54 bps higher than the euro-peso spread negotiated in the transaction.

■ Peso-denominated long bond issued in the local market (Certificado Bursatil).

The local bond would compare very closely with the peso Eurobond, notwithstanding that TV has a 4. 9 percent withholding tax impact on interest payments from issuing in a foreign capital market versus issuing in the local market.

a. What are the differences—if any—between a 30-year peso Euro-note and a peso-denominated bond? Which issue would you expect to cost less for Televisa?

b. What is the nominal cost for Televisa of borrowing U.S. dollars? What would be the effective cost of US$ financing?

c. What is the cost of US$ financing swapped into MXN?

d. Which funding option do you recommend to Televisa?