Category: Regions

Mexico’s National Development Plan (PND) for the sexenio, which aims to raise growth to 5.0% from 3.5%, is realistic, according to Goldman Sachs. “The policy proposals are sensible, making the PND realistic, particularly given the first signs of a capable administration which is willing and able to work across all political forces to achieve their objectives,” says the shop, adding that it sets “optimistic but yet feasible targets for the administration”. The PND message is that Mexico is stuck in a 3.5% growth rut owing to insufficient reforms and lack of investments and growth in productivity and competitiveness. “Based on a comprehensive approach consisting of prioritizing investments, implementing structural reforms, improvements in education, development of infrastructure, anti-trust policies and increase competition, and the rule of law, the Calderon administration aims at raising the bar to 5.0% by the end of the sexenio, which is a target that we deem to be realistic,” says Goldman.

Ternium, which is acquiring IMSA in Mexico, has completed the wholesale syndication of its $3.82bn loan being led by Citi, and will go out to general syndication starting Monday. Calyon, ABN AMRO, BBVA, Unicredit, Deutsche Bank, Intesa San Paolo, JPMorgan and BNP are MLAs. Lead tickets were announced at $425m. Roadshows will be held in New York, Mexico City and Milan.

Bankers in Mexico City are getting excited about the business flow from infrastructure financing. This includes privatizations of toll roads, bridges, new ports, hydro-electric power facilities and water treatment facilities. For existing concessions of toll roads, for example, future flow securitizations are expected to be the vehicle of choice. But a range of greenfield projects will also be awarded, and bankers say big lenders, private equity investors and specialized infrastructure funds based in the US and Europe already have their eye on the scene. Available long-term financing in local currency, an oversupply of appetite for securities by local pension and mutual funds, and a solid legal framework are seen as the convergence factors.

This year’s Mexican peso corporate pipeline looks pretty slim, at least for plain vanilla high-grade certificados. “I don’t see very much at all this year,” says a Mexico City-based capital markets banker at a global investment bank. The supply opportunity is mostly in Europeso and MBS, the banker adds. However, some of these markets are getting saturated. A general lack of assets and continued accumulation of cash at the Afores is pushing pricing ever tighter, say bankers. Besides structured finance, equities markets are also expected to pick up and there is the expectation of more leveraged deals. But thanks to a spree of pre-financing ahead of a turbulent election last year and the relative lack of urgent need for capex funding, deals will be largely be event driven, and should not diverge too much from the odd refinancing. Pemex is one likely candidate for a large local issue, probably at the long end.

Mexican bankers are eagerly preparing for hefty toll road concession auctions. They are advising a host of bidders on the first part of the $25bn FARAC concession, which will be auctioned off in five portions. The first part, for a set of roads in Jalisco, will be sold at the end of June, and could go for up to $4bn, according local banker estimates. The winner of the auction will automatically be in pole position for upcoming mandates because of the experience it will gain from having Jalisco under its belt, say bankers. Since the toll roads are already operational and have track records, the initial financing will likely be done with a bridge loan, followed by subsequent takeouts in the ABS market with tenors as long as 30 years, and initial leverage of more than five times, according to some proposals. UDI-based supply is forecast. At least three banks LatinFinance spoke to in Mexico are backing a bidder, and the expectation is that everyone who considers themselves a player is looking to get involved. FARAC is the trust fund set up after the mid-90s financial crisis to rescue private toll companies.