PF Archive

Capital markets beat Banobras to Mexico's recovery

15 12 2009

The sale of the Pacifico Norte roads concession package could mark the moment that Mexico fixed its roads programme. The country's transport and communications ministry, the SCT, had failed to attract any compliant bids when the roads were part of a larger package, a follow-up to the richly-valued Farac I portfolio. The smaller package is meant to be easier to digest, and came with the offer of stapled financing from Banobras, Mexico's development bank. But the winner of the package, Carlos Slim's Impulsora del Desarrollo y el Empleo en América Latina, or IDEAL, is unlikely to use the staple. Shortly after it won the package, it closed a bond financing for an earlier collection of roads, without monoline or government support. IDEAL's chief rival, ICA, together with Goldman Sachs, had conspicuously failed to refinance the bank debt for Farac 1 in this market. But it did complete a sale of equity in the portfolio to institutional investors, using the proceeds to pay down bank lenders. Mexico's pension funds threw off their nervousness about infrastructure and responded to the sale of the equity in Red Carretaras de Occidente with gusto. These institutions had until recently been nursing heavy losses on monoline-wrapped debt commitments. They now throw themselves into the riskier parts of infrastructure's capital structure with gusto. Meanwhile, junk-rated monoline MBIA has returned to market with an Opic-backed financing for the state of Mexico's property registry. Can financial engineering and the search for yield do for the country's infrastructure market what well-intentioned government initiatives...