The first Mexican peso deal guaranteed by a monoline priced May 30 and the results augur well for more full wraps. "It is encouraging," said Diana Adams, managing director of emerging markets at Ambac. Amounting to Ps1.94 billion (US$183 million), the 12-year transaction - a securitization of toll-road revenues - yielded an inflation-indexed 4.95% thanks to a surety provided by MBIA. More significantly, it came at a spread of 24 basis points over the government’s 10-year UDI bono, massively tighter than any other structured deal rated triple-A on the Mexican national scale.

BBVA Bancomer was the structurer and lead placement agent; Deutsche Bank and Banc of America were co-issuers.

The deal even priced inside of top-notch plain vanilla deals, which usually beat out securitized transactions in the same ratings category because local investors demand a premium on anything but the simplest structures. "It shows that investors are recognizing that the risk is superior with a monoline wrap," said a banker close to the transaction. "We will be seeing more of these [guarantees] on similar projects."

Still, the wrap was not a staggering success in that Mexican investors, as expected, did not accept a pricing tight to treasuries. In theory that could have happened, given that the enhancement took the deal to triple-A on the global currency scale by Fitch Ratings and Standard & Poor’s. That means that the deal was effectively higher rated than Mexican government paper. S&P, Moody’s Investors Service and Fitch rate Mexico ‘A-’/ ‘Baa1’/‘BBB’ in local currency rating on the global scale.

In addition, for many issuers partial guarantees will likely remain preferable to total wraps. Sources point out that the toll-road sector, bruised badly in the aftermath of the Tequila crisis of the mid 90s, was an especially good candidate for the total wrap. Other, less fraught asset groups may find that the expense of the total wrap outweighs its usefulness.

The originators of the deal are Promotora de Autopistas del Pacifico and Promotora y Administradora de Carreteras, units of infrastrucuture company Tribasa. Pacifico operates a stretch of highway beween the cities of Armeria and Manzanillo, while the other subsidiary is responsible for the Ecatepec-Piramides roadway.

Proceeds are going to retire a US$100 million 144A issued in 1993.


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