RCO Reopens Mexico Road Securitization Market

Mexico’s Red de Carreteras de Occidente (RCO) has raised MXP8.12bn ($624m) in the Mexican bond market, pricing at the upper end of its MXP6bn-MXP8bn size objective after seeing 1.6x demand. In the first deal of its type in nearly a year, the concession operator priced a MXP2.84bn 15-year peso-denominated tranche with an 11-year average life at 9.0%, or Mbonos+340bp. A separate MXP5.28bn 20-year UDI-denominated portion with a 14-year average life came at 5.25%, or Udibonos+332bp. Investors and analysts had been expecting spreads around 270bp for each tranche prior to the transaction, though bankers claim the expectations were 330bp-350bp. Each tranche had a maximum possible MXP5bn size. The deal is rated AAA on a national scale and is backed by future toll road revenues and supported by a partial guarantee from government development bank Banobras. The bond market offers a good alternative to refinancing for RCO, which has significant syndicated loan debt, according to investors following the deal. Market conditions are also more favorable this year than last for issuing a securitization of this size and tenor, they add. BBVA Bancomer, HSBC, Inbursa and Santander managed the sale, with Goldman Sachs and HSBC as structuring agents. RCO raised MXP6.5bn in the CCD markets in 2009. The domestic market was able to place toll road securitization issuance last year, but not with size. Concesionaria de Autopistas del Sureste raised MXP3.5bn in October through 26.5-year UDI-denominated bonds priced at 6.0%. This followed a MXP1.71bn 2031 deal in April 2011 for OHL’s Gana subsidiary at 6.64%.