Investors concerned about Mexico airport bond buyback

Investors in bonds issued for the NAIM construction have pushed back against a debt buyback

Investors concerned about Mexico airport bond buyback
Mexico said on Monday that it would buy back up to $1.8 billion of $6 billion in debt issued to fund the airport - Photo: File photo/EL UNIVERSAL
English 06/12/2018 13:57 Newsroom & Agencies Mexico City Leonor Flores & Antonio Hernández/EL UNIVERSAL, Reuters Actualizada 13:58
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A group of investors in bonds issued for the construction of a new Mexico City airport that the government is scrapping has pushed back against a buyback of the debt.
Mexico said on Monday that it would buy back up to $1.8 billion of $6 billion in debt issued to fund the airport.

The leftist government of President Andrés Manuel López Obrador, which took power on Saturday, has said it is canceling the partly-built project.

But a group represented by law firm Hogan Lovells, calling itself the “MexCAT Ad Hoc Bondholder Group,” said late on Tuesday it was not consulted on the tender offer, and could not support it.

The Mexico City Airport Trust’s offer allows holders of four series of bonds to sell them back at between $900 and $1,000 per $1,000 principal, and seeks consent to remove some covenants and events of default relating to the canceled hub.

Through a press release distributed by the Business Wire news outlet, the group expressed that they were unable to comply with the new conditions, though they expressed their interest in holding a dialogue with the government.

The New York law firm stated that the bondholders had analyzed the proposal, though there were certain clauses that had raised concerns among the investors, which is why they refused to support the current version.

Among the investors’ concerns were the release and revocation of the guarantee and events of default conform with the applicable documentation.

Regarding the current airport, they are worried about a possible reduction of guarantee derived from the use and construction –on the short and long term- of alternative or additional airports in or near Mexico City.

Furthermore, additional cuts to the guarantee regarding the release of qualified advance payments in two of all four series of bonds are likely to happen. It is considered that bondholders participating in the public bid consent to the liberation of guarantee and modifications made to conventions and events of default.

However, Hogan Lovells stated that his clients were willing to discuss their concerns with MexCAT.

The Government’s right

The managing director of HSBC Mexico, Nuno Matos, said that the federal government had every right to cancel the New Mexico City International Airport project, and that the decision to issue a bonds repurchase fell in line with the options offered by the government.

“The bonds repurchase proposal is an appropriate step following the government’s promise to meet its financial commitments. This is an essential pillar to promote trust among economic agents,” he said.


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