More details have surfaced on a transaction that could herald XL Capital's debut as a guarantor in Mexico's domestic market (see ASR 10/31/05, p.4). In its current preliminary form, the deal is a Ps550 million ($51 million), 22-year bond backed by toll road revenue generated along the Matehuala bypass. The originator is Desarrolladora de Concesiones Omega (Decomsa) and the arranger is Banorte. Moody's Investors Service and Standard & Poor's have given the transaction preliminary triple-A ratings on their respective national scales, based on the XLCA surety. The monoline insurer has not finalized its participation in the transaction, according to a source close to the deal. XLCA is, however, listed on a preliminary prospectus registered with the Mexican Securities Exchange.

Proceeds from the deal will go to refinance debt used to build the 14-kilometer bypass, which was welcomed by truck drivers hauling cargo between the northern border town of Nuevo Laredo and Mexico City, according to a source close to the deal. Prior to the project, traffic along this vital commercial route was forced to enter the city of Matehuela, located in the northeastern state of San Luis Potosi. Decomsa began building the bypass in October 2003 and completed it last November. While a single year is usually not enough time for a toll road to generate much of a performance history, it links to an interstate that has a proven track record, the source said. As part of the same concession, Decomsa also widened a major artery in Matehuela.

According to the deal's preliminary prospectus, under a base scenario traffic through the bypass would average 2.2% growth for the next 20 years. The base scenario is predicated on the smooth continuance of current economic growth for both national and regional economies in Mexico. Revenue totaled Ps63.7 million in 2004 and is forecast to hit Ps67.3 this year. Trucks are expected to remain the major contributors to the cash flow. They made up 44.5% of the bypass traffic, but 73.7% of the total revenue, from Nov. 13, 2004 to May 25, 2005.

While XLCA appears ready to steer its way into Mexico's toll road business and two others in the pipeline are due shortly, a few outstanding highway deals are facing potential potholes that prospective players would be wise to watch out for. (See related story).

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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