Mexico to buyback debt of canceled airport

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On Monday, Mexico's government said it would repurchase some of the debt used to fund a partly-built airport canceled by the new President , even as work at the site continues.

The new government will launch a USD $1.8 billion offer to buyback the NAIM bonds . The proposal will be valid for the next 20 business days, and they expect enough acceptance proposals to be able to announce the end of the NAIM project in late December.

This way, when the 2019 budge t is presented, the airport issue will be solved and it will bring certainty and clarity to the markets and investors .

During a press conference, President Andrés Manuel López Obrador said that the trust will back the bonds so that the investors won't be affected and their investments are guaranteed.

“The misunderstanding or misinformation or the lack of clarification in regards to what happened is originated by the fact that the trust will be maintained because it's an open process, the construction of the other runways in Santa Lucía can begin, but the trust will continue until the process that has to do with the investments is over,” he said.

In October, Veteran leftist Andrés Manuel López Obrador said that he would scrap the USD $13 billion Mexico City airport , arguing that the project was tainted by corruption and would be expensive to maintain.

On the first weekday of his new administration, the Mexico City Airport Trust said it would buy back up to $1.8 billion of $6 billion in debt issued to fund the airport , in an offer that runs through the start of January.

Mexico's peso MXN initially rose on the news, but later pared most gains over uncertainty on the plan going forward.

MARKETS NOT TOTALLY CONVINCED

The cancellation of the airport project triggered a slump in Mexican assets due to concerns about how López Obrador would manage Latin America’s second largest economy.

Analysts said news of the buyback showed the veteran leftist was serious about paying investors , but that worries about the new government would persist.

This is “a first step in trying to fix a complicated situation. It remains to be seen how the government will actually proceed with the cancellation of the project,” said Alejandro Velasco , vice president, emerging markets fixed income at Allianz GI.

At López Obrado r’s first news conference since taking office on Saturday, the President said bondholders’ investments would be guaranteed and more details would be offered on Tuesday after he met with Finance Minister Carlos Urzúa.

“What I reiterate is that the investments of the shareholders are guaranteed and that agreements are also being reached with the construction companies ,” López Obrador said.

The new head of the Mexico City airport group said some construction at the site will continue in the incoming weeks to meet obligations during the buyback offer .