The Mexican state of Chihuahua is shooting for Wednesday to issue a Ps1.2 billion ($112 million), 10-year deal backed by federal co-participation revenue, which comes from payments by the central government to states and municipality. All the proceeds of the transaction will go to paying down loans owed to BBVA Bancomer, Banamex, and Banobras, according to Jesus Ruiz, director of spending of Chihuahua's secretariat of finance. "We're lowering the rate and capping it," he said, adding that the state sought to put a 12% cap on the upcoming deal. Initially the cap was projected at 15% (see ASR 9/26/05)

If pricing is held Wednesday, funding will be on Friday. The placement agent is Acciones y Valores, a unit of Banamex, which is, in turn, owned by Citigroup. The structurer was Corporativo en Finanzas. Fitch Ratings and Moody's de Mexico have rated the deal AAA(mex)' and Aaa.mx' on their respective national scales.

Elsewhere in Mexico's sub-sovereign sector, the municipality of Aguascalientes is returning to the market with a small Ps100 million, five-year deal backed by co-participation revenue. The deal is the third off a master trust established in December 2001. Moody's rated the deal Aaa.mx' on the national scale. Proceeds of the deal will go to prepay a Ps14 million loan owed to Banobras, which would wipe out all debt outside the paper issued by the trust. The rating agency said that Chihuahua's plans to avoid borrowing money in 2006, while the 2001 paper amortizes. "[However] if the municipality were to borrow an amount that raised debt levels again in a significant manner, even if these were within the limits set by the master trust, the credit quality of the city could come under pressure," Moody's said in a report. The agency rates the underlying credit quality of Aguascalientes, Aa2.mx' on the national scale.

Mexico's Federal District, basically encompassing Mexico City, is also tapping the market again with a structured deal, this time via local brokerage IXE. In past issuance, the city has placed deals secured by loans that are, in turn, backed by receivables. Because of its special status as the seat of government, the Federal District can't use its federal participation revenue to directly back paper.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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