Top-rated Mexican municipality Guadalajara came to market Dec. 6 with a Ps800m (US$78.6) deal backed by federal co-participation revenues. Santander and Citibank co-led the issue, which priced 140 basis points over 90-day Cetes, at the wide end of price talk. It is backed by federal co-participation revenues, an asset class widely used by Mexico's subnational entities.

Standard & Poor's and Fitch Ratings rated the deal AAA' on the national scale. The deal has pushed out the country's debt profile, given that the previous debt load was comprised of short-term credits.

One unique feature of the deal is "inflation-protection." Should inflation spike up for whatever reason, the deal ensures investors a return of no less than 200 basis points over the main inflation index.

Another subnational that hit the markets last week was the State of Mexico (see ASR 12/02, p. 19). Structured by local investment bank Protego Asesores, the deal priced in two tranches. A five-year floater yielded 300 basis points over three-month Cetes and a fixed-rate five-year priced at 13%. The floater was worth Ps334.4 million (US$32.8 million), while the fixed-rate piece equaled Ps185.6 million (US$18.2 million). Santander was the issuer, while Thacher Proffitt & Wood provided legal counsel.

The deal went primarily to retail and investment funds, according to sources familiar with the transaction. One reason pension funds were bypassed was the A' rating on the national scale assigned by Standard & Poor's. Mexican pension funds are by law prohibited from buying paper below double-A. Fitch-ratings gave the deal AA' on the national scale.

The State of Mexico may revisit the market this week. Also ahead in the subnational sector is a deal from the state of Guerrero. That issuer is readying a Ps1.5 billion (US$147.3 million) program with a 12-year maturity. Chances are it will issue in tranches. It is backed by federal co-participation revenues and has a AA+' rating on the national scale from S&P. Local investment bank

IXE is heard with the mandate.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.