Mexico moves to buy back airport bonds

Mexico moves to buy back airport bonds

Bonds Debt Capital Markets Corporate & Sovereign Strategy Economy & Policy Fixed Income Funds Project & Infrastructure Finance Politics Mexico

Two days after President Andrés Manuel López Obrador took office on December 1, the Mexican government said it wants to buy back up to $1.8bn in bonds issued to finance the construction of a new airport in Mexico City.

The state-owned airport operator GACM has issued $6bn in bonds since 2016, with $1bn in 4.25% 2026 notes, $1bn in 3.875% 2028s, $1bn in 5.5% 2046s and $3bn in 5.5% 2047s.

The Mexico City Airport Trust, or Mexcat, has asked bondholders to submit their notes through a modified Dutch auction for $900 to $1,000 for every $1,000 in principal. The trust offered to pay a $50 premium and a $7.50 consent fee for notes tendered by the early deadline on December 17. The final deadline is January 2, Mexcat said in a statement.

GACM's bond prices dropped to about 77 cents on the dollar after almost 70% of voters rejected the new $13.3bn airport in a national referendum in October. The new head of GACM, Gerardo Ferrando, said in an interview with Radio Fórmula that construction will continue until the end of the year. 

"We don't want to give any sign that we will breach any of the bond commitments," Ferrando said in the interview.

The government is expected to make a final decision on the airport early next year. AMLO has proposed building a new airport at the Santa Lucía air force base in the state of Mexico as a cheaper alternative.

Citi, HSBC and JPMorgan are the dealer managers on the buyback, Mexcat said. Cleary Gottlieb said it is representing Mexcat on the transaction, while Paul Hastings is working with Citi, HSBC and JPMorgan. A group of bondholders have hired Hogan Lovells to represent them.