Banobras Turns Guarantor from Lender

Following the success of a debut first loss guarantee venture with the State of Mexico’s jumbo refinancing, Banobras seeks more applications for its new product. Typically a creditor to states and municipality, the development bank’s function has been usurped by ample private liquidity. “We’re substituting that role with being a guarantor,” Banobras president Alonso Garcia Tames tells LatinFinance. State of Mexico last month wrapped up the final phase of a MXP25.2bn refinance, extending duration and slashing the price on 87% of its debt, using a 27% guarantee from Banobras. The enhancement was designed to get the state the best possible rating with the smallest possible commitment, says Garcia. In another new feature for Banobras, the bank was structuring agent on the state’s deal and also acted as intermediary on swaps to fixed rate. Even after paying for the guarantee, structuring and swaps, State of Mexico’s all in cost was a weighted average spread of 47bp over 28-day TIIE versus a 170bp spread before the refinance, according to Garcia. “It was more competitive for the state [than funding alternatives],” says the official, adding that it saves the state MXP2.4bn in debt service for the rest of the Calderon administration. “It’s a very important deal for the local markets because it shows the development of the Mexican market in the last few years,” he adds.