While new players merge into Mexico's toll road sector (see related story), the ride's been a little bumpy for a few existing projects, with severe weather to blame in a couple of cases. An MBIA-wrapped transaction for a highway in the state of Nuevo Leon - also the originator - has recently drawn heightened scrutiny because traffic diverted onto the road due to a collapsed bridge is not being charged any tolls. Nuevo Leon has said it would compensate for the shortfall by dipping into its own coffers, according to sources.

MBIA Managing Director Franklin Minerva said force majeure provisions are built into the deal contract. "The state can take certain action unilaterally in an emergency," he added, noting that torrential rain is what caused the bridge to fall. "The contract not only provides for these circumstances, it also provides for how the trust would be paid. We're comfortable with this situation," Minerva said.

Issued last Dec. 14, the $232-millon equivalent 25-year transaction priced at an inflation-indexed 5.70%. Lead arranger Banorte structured the transaction jointly with Chile's Project Finance Associates. The deal collects flows from the highway between Monterrey and Cadereyta. Fitch Ratings, Moody's Investors Service, and Standard & Poor's rate the transaction triple-A on their respective national scales.

Backing MBIA's third domestic transaction, the road has been allowing drivers to and from Benito Juarez to use the road for free. "[But] these vehicles are still counted," said Salvador Salazar, associate director at Fitch. The free ride for affected traffic took effect Oct. 14 and should end around Nov. 30, the date by which the fallen bridge is expected to be rebuilt and operable, according to Salazar.

Standard & Poor's Ratings Specialist Fabiola Ortiz said this wrinkle in the transaction was something the agency "was looking into." Neither S&P nor Fitch, however, has issued any ratings watches on the transaction. A Moody's analyst did not return a call for comment.

The bridge collapse isn't the only twist in the first year of the Monterrey-Cadereyta toll road deal. The highway has also allowed traffic to and from the airport to pay lower rates. This is because the main road to the airport is under construction, according to MBIA's Minerva. "There was an agreement made to reduce that rate because everyone going to the airport ends up having to use the toll road," he said. "Again, the state is obligated under the contract provisions to compensate the trust so there's no impact on MBIA." But the state hasn't had to open its wallet because flows into the trust have proven strong enough to offset any losses from the discounted airport traffic.

Fitch's Salazar said the discounted airport traffic was largely immaterial to the transaction. "When the deal came out there wasn't this airport highway," Salazar said. "We didn't give it a value." Upon completion of the alternate road, scheduled for no later than December, the toll for airport traffic will be increased or reset.

Despite these two events Minerva said he was satisfied with the deal's performance, which has met expectations.

Meanwhile, two other toll road transactions covered by Fitch Ratings have tooled onto the radar. The agency put on downgrade review two tranches of a bond backed by toll receipts from a road pummeled by Hurricane Wilma. "It's an extreme situation," said Eugenio Lopez, senior director at Fitch. "There have been other hurricanes and this hasn't happened."

Sized at Ps1.08 billion ($100 million), the A tranche has a 17-year maturity. The B notes, amounting to Ps200 million, have an 18-year maturity. Both were issued in 2002. On the national scale, Fitch rates the A piece AA(mex)' and the B piece A(mex)'.

Nearly half a mile of highway between Kantunil and Cancun in the country's southeast remains submerged under water over three feet deep. Because of the flooding, cars and buses - which historically make up 86% of the highway's traffic - have not been able to use the road. Still, Fitch pointed out in a report that the road has averted structural damage. Kantunil is in the state of Quintana Roo, while Cancun is in Yucatan.

Speed bumps have also rattled a more obscure Ps230 million deal issued in 1993, before the Tequila Crisis wreaked havoc on the toll road sector. Formally called LAVENTA93U, the transaction securitizes toll receipts from the Chamapa-La Venta road in the State of Mexico. Fitch withdrew its AA(mex)' national-scale rating on the deal in late October due to a lack of information from the concessionaire, which is Ideal, shorthand for Impulsora de Desarrollo Economico de America Latina. In a turnaround, the company submitted operational information to Fitch last week, said Salazar. "We're analyzing it," he added. Ideal is owned by Carlos Slim Helu, who Forbes ranked as the world's seventeenth richest person for 2004.

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

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