RCO Set for Domestic Toll Road Securitization

Mexico’s Red de Carreteras de Occidente (RCO) is expected to price a toll road securitization today, in a deal raising as much as MXP10bn ($770m). The concession operator could be looking at a spread of around Mbonos+270bp for a 15-year peso-denominated tranche with an 11-year average life, and around Udibonos+270bp for a 20-year UDI-denominated portion with a 14-year average life, according to buyside sources following the process. “The deal looks interesting and the spread where they are looking to price is reasonable,” says a Mexico City-based fund manager following the trade. The deal is backed by future toll road revenues and supported by a partial guarantee from government development bank Banobras. It would be the first such sale in Mexico since October of last year, the first for RCO – winner of the 2007 road concession originally known as Farac – and would represent a sizeable transaction for a Mexican local securitization market seeking greater supply. “We are looking at the deal with a lot of interest, but we’re analyzing if we want to add more infrastructure debt in our portfolio or look to equity stakes,” adds another fund manager, highlighting the option of equity deals in a building Mexican pipeline including a follow-on from infrastructure firm Pinfra. The bond market offers a good alternative to refinancing for RCO, which has significant syndicated loan debt, according to investors following the deal. They note market conditions are more favorable this year than last for issuing a securitization of this size and tenor, with more liquidity and appetite now. The asset – offering the fastest road connection between Mexico City and Guadalajara – is not only a mature one with years in operation, but also boasts growth potential. The deal is rated AAA on a national scale. BBVA Bancomer, HSBC, Inbursa and Santander are managing the sale, with Goldman Sachs and HSBC as structuring agents. RCO raised MXP6.5bn in the CCD markets in 2009. The domestic market w