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 subnational 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. Protego Asesores is structuring agent, Deutsche Bank is issuer, and Curtis, Mallet-Prevost, Colt & Molse is legal counsel for the program.

Stalled for a few weeks by regulators, the structure should be ready for road show next week, said Luis Videgaray, managing director of Protego. 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.

Moody’s Investors Service and Standard & Poor’s have given the deal preliminary ratings of ‘Aaa.mx’/ ‘mxAAA’ on the national scale. The respective underlying ratings for the municipality are ‘Aa3.mx’/‘mxAA’.

With this deal, Tlalnepantla is breaking new ground. Apart from the State of Mexico, all deals that have closed in the subnational 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".

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