As in Brazil (see article p.19), steeper interest rates courtesy of the war threat are weighing on the minds of Mexican bankers. However, the effect has been more to cool down a red-hot market than to snuff out the flames altogether. The benchmark interest rate TIIE hit a peak for this year of 10.19% Feb. 14, but has come down since then. As long as the war rhetoric remains just that, two deals likely to price soon are Guerrero and a deal involving Grupo Carso, Mexico's colossal industrial-retail conglomerate.

Sized at Ps500 million (US$46 million), the Carso deal is a securitization of loans to Sears Roebuck de Mexico and Procelanite, both part of the group. The deal has a five-year tenor and is patterned after a structure familiar to BBVA Bancomer, which is leading the deal along with Inbursa. Two years ago the bank securitized a loan to a British American Tobacco subsidiary, which gave investors the opportunity to take on the risk of a company that could not issue directly in the market under securities regulations. That deal amounted to Ps1 billion. Standard & Poors is heard rating the current transaction AA' on the national scale. Timing is for this week and the loans should close with issuance. Grupo Carso is run by Carlos Slim, one of the wealthiest men in Latin America.

Also looming on the horizon is Guerrero, a Ps1.5 billion (US$137 million), 12-year securitization of federal participation revenue generated by its namesake. Interacciones is leading the deal and Valencia de Toro is legal counsel. The transaction has national scale ratings of AA+(mex),' mxAA+,' and Aa1.mx' by Fitch Rating, S&P and Moody's Investors Service, respectively. It is due out within the next couple of weeks.

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