Deutsche Banc is looking to make some connections in the U.S. private placement market for Mexico's Comisin Federal de Electricidad (CFE), the Mexican public electric energy utility. The $54 million offering is a somewhat unorthodox re-packaged bond backed by payments from the CFE - the bond will draw on a $90 million issuance initially sold two years ago under a build, lease, transfer (BLT) agreement for the construction of the 450 mega-watt Rosarito power plant. The original buyer of that debt is looking to unload part of its holding, but rather than selling the senior debt in the secondary market Deutsche is using it to back the new issuance through a special purpose entity.
Now that the Rosarito project is operational, its BLT has expired and the plant is now being run by the CFE, which will generate the cash flow for participating investors. S&P rates CFE at BBB- while the NAIC gives the utility a two. The new instrument will be priced at a spread over Mexico's 10-year bond - currently trading at roughly 220 basis points over U.S. Treasurys.