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 (see ASR 5/26, p.1). The originators of the deal are Promotora de Autopistas del Pacifico and Promotora y Administradora de Carreteras, units of infrastructure company Tribasa.

The deal even priced inside of top-notch plain corporate bonds, 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 source on 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, would not swallow 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 paper was effectively safer than the government. 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 costs are still too high for many issuers," said a banker away from the Tribasa transaction. "I don't see it happening in other sectors."

BBVA plans to bring another deal to market from the infrastructure sector in early July. Ecocys III is a securitization of concession fees from public water company SAPAL to operator Ecocys. The seven-year transaction is sized at Ps265 million (US$25 million) and is primed to get a rating of AA+' on the national scale by S&P and Fitch. Proceeds will go to refinancing debt. Gulesserian Consultores is a financial advisor to Ecocys, while Franck, Galicia y Robles is understood to be legal counsel for the program.

Mexico's Tlalnepantla nearly good to go

Atavistic only in name, the municipality of Tlalnepantla in Mexico is gearing up to place a Ps96 million (US$9.1 million) securitization of property taxes and water fees, opening up new assets for the sub-national sector. Timed for pricing in late June, the deal boasts a letter of credit from Belgium's Dexia Credit guaranteeing about 90% of the transaction at the time of issuance. That enhancement, in turn, is one-third backed by the International Finance Corporation (For more details see ASR 4/7, p.20).

Stalled for a few weeks by regulators, the structure should be ready for road show this week, said Luis Videgaray, managing director of structurer Protego Asesores. Tlalnepantla is not the only recent Mexican securitization to slog through the approval process. Tighter rules for debt issues implemented in late March and abundant supply has slowed down regulators, even though market players welcome both events, bankers say.

With this deal, Tlalnepantla is breaking new ground. Apart from the State of Mexico, all securitizations that have closed in the sub-national sector have been backed with federal co-participation revenues disbursed by the central government.

Tlalnepantla is one of stronger public sector credits in Mexico. It ranks fourth in economic output among municipalities and scores above average in per capita income and other socio-economic indicators. Derived from the native Nahuatl language, its name joins the words for "earth" and "in the middle".

Mexican state of Guerrero downsizes

The state of Guerrero will close out a securitization program with a Ps491 million (US$47 million) placement, bringing the total to Ps1.35 billion (US$128 million), instead of an originally planned Ps1.5 billion (US$142 million) (see ASR 5/26, p.22). Issuance for the second and last issue of the program is timed for the end of June. "The issuer found that this was enough to refinance previous debt," said a banker close to the deal (see ASR 5/19, p.29).

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