Fonadin to Buttress Farac Amid Choppy Markets

Mexico’s MXP270bn Fonadin infrastructure fund is set to help coming toll road concession winners battle volatile market conditions. The recently established fund will provide credit to concessionaires in the absence of capital market funding. “The financial markets have changed [since last year’s FARAC financing], but on the positive side there is now the Fonadin in place to mitigate some of the problems in the markets,” Fonadin director Federico Patino tells LatinFinance. He points to wider spreads and the reduced clout of monolines as the biggest challenges to the winning bidders getting financing for the projects. The government hopes to name the winner of Fonadin’s first road package – known in the market as FARAC II – in October or November, he says. Fonadin is working with the IDB and World Bank to offer the winning bidder with a “synthetic monoline” to improve the risk profile. He says the fund also expects to provide some subordinated debt financing to the project. The key for the fund is supporting the project’s rating to encourage lenders, particularly Mexico’s highly liquid pension funds, he says. The equity component, likely higher than for Farac I, will be less of a challenge given the strength of the bidders.