Category: Regions

Grupo Empresarial Mar de Cortez (GEMC), the Mexican bus company, has signed a $45m 6-year loan through International Assets Holding Corporation as placement agent. The fixed rate deal pays 10.6%. According to GEMC’s Manuel Palazuelos, the deal helps extend the average maturity of the debt. GEMC operates in Baja California.

S&P has raised its banking industry country risk assessment (BICRA) on Mexico to group 4 from group 5 to reflect a relatively stable Mexican economic and monetary environment, low levels of indebtedness of enterprises and households, expansion and maturation of local capital markets, and the sustained improvement in the financial performance of the banking sector. “Sustained development of the debt markets has expanded the funding sources available to both corporate and financial institutions,” says the agency. “The performance of Mexican banks has improved considerably during the past few years, buoyed by fewer loan losses, a more profitably asset mix geared to higher yielding consumer loans, and improvements in operating efficiency,” it adds. Risks include a lack of political consensus to boost economic growth; shortcomings in the judicial system; and lingering corruption. The BICRA reflects the strengths and weaknesses of a country’s banking system relative to those in other countries and ranges from 1-10.

Mexico’s Comisión Federal de Electricidad’s (CFE) is planning to issue up to MXP1.5bn in 2017 certificados bursatiles from a shelf set up by HSBC. Moody’s assigned a Baa1/Aaa.mx, following the proposal to increase the program to MXP12bn from MXP6bn. The rating outlook is stable. The deal will be backed by a senior unsecured term loan from BBVA Bancomer to CFE. The shelf allows issuance of certificados through a trust operated by HSBC Mexico, whose main assets are loans by participating banks to CFE. Through the loans, CFE provides senior unsecured pledges of interest and principal payments to the trust. The amount of certificados bursatiles currently outstanding under the shelf program is MXP3.25bn, say Moody’s. CFE is the Mexican government’s agency responsible for the strategic development, construction, operation, and maintenance of Mexico’s electricity system.

Moody’s is assigning a high probability to Mexico’s congress approving the fiscal reforms proposed by President Calderon, by the beginning of September. Mexico’s fiscal system is among the weakest in LatAm, says Moody’s, with tax revenues of only 10% of GDP, about half the ratio seen in most large South American countries,. The reform, which proposes the creation of three new taxes – 19% for corporations, a 20% tax for gambling and a 2% tax on cash bank deposits – should generate additional revenues equal to about 2.8% of GDP by 2012. Without structural changes, the Mexican economy would grow no more than 3.5% in the best case, says Moody’s, adding that even a modified reform adding up to at least 2% of GDP would be “a step forward.” The agency predicts fiscal reform would boost inflows from foreign investors, feeding into higher production capacity. Approval by Congress of Calderon’s fiscal reform would be a huge boost to his presidency, and a triumph for his finance minister Agustin Carstens, who has prioritized fiscal reform since assuming office in 2006.

Mexico’s largest, government-run, home-finance agency – Instituto Nacional de Fomento a la Vivienda ( Infonavit) says it plans to tap the US market, despite the gloomy market conditions for mortgage-backed securities. The agency – which has so far placed MXN16.4bn of its mortgage-backed Cedevis in Mexico, representing about 39% of all such paper issued in the market – is keen to lure investors from beyond the Mexican borders. The proposed transaction is still subject to permission from the US Securities and Exchange Comission. Grupo Financiero Banamex is advising Infonavit on the US sale.