Tuesday, 16 October 2018

Latin America Corporate Bond: Mexico City Airport Trust’s US$2bn Green bond

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A runway success

Mexico City Airport Trust’s US$2bn Green bond offering set a number of milestones when it hit the market in September.

It was the first Green bond to finance a new airport; the largest-ever from Latin America; and the first from an emerging market country to receive a new Green bond grade from Moody’s.

“Mexico has made a commitment to reduce greenhouse gas emission under the Paris Agreement by 22% by 2030,” said Henry Shilling at Moody’s, which gave the deal its highest GB1 Green rating.

“The airport, which will be environmentally sustainable, reflects a follow-through on this commitment.”

Yet there was more to the deal’s appeal than just its environmental promises, as evidenced by a roughly US$14bn order book for the two tranches of 10-year and 30-year bullets.

Larry Cyrlin, head of infrastructure finance for the Americas at Citigroup – one of three global coordinators along with HSBC and JP Morgan – said the trade was unique.

“It is the largest-ever and longest-ever issuance in Latin America in terms of the 30 and 10-year bullet structure,” he told IFR. “The 30-year bullet is very rare in infrastructure, and it demonstrates the confidence that investors had in the transaction.”

At HSBC, the Green adviser on the transaction, co-head of DCM Latin America Juan Claudio Fullaondo, said leads had wanted to include Asian buyers – and were rewarded for doing so.

“When we woke up, the book was already oversubscribed,” he said. “The US was not even open.”

Blake Haider, managing director of Latin credit markets at Citigroup, said demand from Asia was remarkable.

“The transaction itself was one of the very few LatAm deals we announced overnight,” he said. “The interest was very broad, including accounts from Taiwan, private banks, institutional money managers and infrastructure.”

The new airport will operate simultaneously with the existing facility in the Mexican capital, which is the second-largest population centre in the world.

A roughly US$6bn total financing will be used to help build the US$12bn airport, whose sponsor is state-owned entity Grupo Aeroportuario de la Ciudad de Mexico.

Bondholders will be paid from cashflows collected via passenger charges from the current airport and the new facility, which is scheduled to open in 2020.

Mexico City Airport Trust (Baa1/BBB+/BBB+) was able to price the 10-year at 275bp over US Treasuries, tight to initial price thoughts of low 300bp on a book of about US$10bn. The 30-year cleared at 325bp over Treasuries, tight to IPTs of mid-to-high 300bp, on roughly US$4bn of orders.

BBVA and Santander were joint books. Co-managers were Credit Agricole, MUFJ and Scotiabank.

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