Mexico does not plan to improve its latest offer to holders of $6bn in bonds issued to fund an airport that is now slated for cancellation, according to the finance ministry, despite a group claiming to represent 50 per cent of the bondholders having given it the thumbs down.
The Mexico City Airport Trust, which is financing the project, “does not foresee making additional modifications to the terms and conditions of the offer beyond those announced on December 11,” the ministry said in a statement on Sunday.
“We believe that the modified offer is a balanced and commercial proposal that respects the interests of the bondholders, Mexcat and the Mexican people,” it added.
On its first working day in office, the new leftist nationalist government of President Andrés Manuel López Obrador made an offer to buy back $1.8bn of the bonds between 90 cents and par, but the offer was rejected by the self-styled Ad Hoc group of bondholders, which at that time held more than $1bn of the bonds.
Mexico countered with an improved offer that implemented some of the bondholders’ concerns about the terms but it was also rejected by the Ad Hoc group last week.
“The effect of the offer implies a reduction of up to 30 per cent of the total outstanding Mexcat debt,” the finance ministry said, noting other mechanisms had been included “by which we expect to reduce the total of net Mexcat debt by at least another $1bn in the next five years, which implies a total reduction of net Mexcat debt of up to 46 per cent”.
“The issue really is that investors want an investment-grade quasi-sovereign [bond],” said one fund manager who asked not to be named.
The Ad Hoc group had said that “any consents provided by bondholders in connection with a tender should be limited to the amount of any bonds actually purchased and should not apply to all bonds held by the bondholder”.
The government said it had been in touch with advisers to the Ad Hoc group, which had refused to say what proportion of bonds it held.
The fund manager said: “They’re going to keep pushing to get the government to buy back 50 per cent . . . The tricky part for the government is that they have to find another $1.2bn but they don’t want [bondholders] to go hostile.”
The finance ministry said that while no sweetened offer would be forthcoming, if this one were rejected in its current form “Mexcat and the Mexican government will reconsider what alternatives exist that allow the government’s objectives to be achieved”.
But it added: “We consider that the possible delay and uncertainty that could be generated is not in the interests of bondholders nor of the Mexican people.”
Mr López Obrador stunned markets at the end of October by announcing, after an informal people’s poll, that the partially built $13bn new Mexico City airport would be scrapped.
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