Mexicali Gets Banobras Loan

The Mexican municipality of Mexicali has received an MXP814.5m 20 year loan from Banobras, the government development bank. Moody’s gives the loan an A1 rating on a national scale. The loan is payable through a trust, to which Mexicali has pledged the flows of 28.5% of its participation transfers from the Mexican government. The loan will pay a spread over TIIE, and will be used to refinance 3 Banobras loans with an outstanding value of MXP735.6m. The ratings action reflects the underlying creditworthiness of the state, a strong trust structure, solid debt service coverage ratios of 2.3x in a base case scenario and 2.2x in a stress case scenario and solid reserve funds that represent 2.2x coverage of debt service at the minimum point over the life of the loan.