This week in the Mexican market, the state of Sinaloa is slated to price a 10-year deal. Sized at Ps830 million (US$76 million) in inflation-indexed units (UDIs), the transaction will be the first off of a Ps1.5 billion (US$138 million) program backed by federal co-participation revenues. IXE Casa de Bolsa is the placement agent, while financial consultancies Fausto Garcia & Asociados and Intefin structured the deal. Standard & Poor's and Fitch Ratings have rated the deal AA+' on the national scale.

The transaction will be priced against the government's UDI bono, an unusual step in the sub-sovereign sector. Most structured deals in this asset class are floaters, pricing at a spread to Cetes treasurys. Price talk on the transaction is hovering between 150 basis points and 180 basis points over the UDI bono.

The transaction also marks Sinaloa's first securitization of federal participation revenue. The state had already tapped toll-road income.

The deal is designed to push out the state's debt profile and slash debt-servicing costs. In particular, Sinaloa will plow the proceeds into retiring loans with BBVA Bancomer, Citigroup-owned Banamex and Banco Vital. The rates on those loans are dramatically steeper than those expected for the upcoming deal.

Sinaloa pulled in Ps4.2 billion (US$386 million) in federal co-participation revenue during 2003. The economy is grounded in natural resources, namely fishing and agriculture. With a Pacific coastline that stretches for 350 miles, the state depends on tourism as well.

Elsewhere in Mexico, a trio of GMAC units is expected to come out shortly with the first issue off of a Ps10 billion (US$919 million) structured program. BBVA Bancomer is the lead and Citigroup unit Acciones y Valores is co-manager on a funding vehicle for GMAC Financiera, GMAC Hipotecaria and GMAC Mexicana.

The underlying collateral is made up of credits to the companies, but the structure differs slightly from other CLO-esque transactions that BBVA Bancomer has executed for units of Mexican conglomerate Grupo Carso. In the Carso deals, the bank itself provided the underlying loan to the designated borrower. In the current structure, the GMAC units will sign a credit contract directly with the trust, managed by BankBoston. "This saves time," said a source familiar with the deal. The program will essentially function as a conduit for the participating GMAC units. The prospectus indicated that Standard & Poor's would provide a rating.

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