Mexico's BBVA Bancomer is preparing a securitization of future toll-road revenues with a price tag of between US$60

million and US$70 million in pesos, according to Gerardo O'Dogherty, debt capital markets director at the bank.

Slated to close at the end of this year or during the first quarter of 2003, the deal is backed by flows from the highway Autopista Veracruz-Cardel, which links the Gulf port of Veracruz with the state capital of Jalapa. Proceeds from the 10-year bond will go to refinancing existing shorter-term debt. Standard & Poor's and Fitch Ratings will rate the transaction.

BBVA Bancomer has been the most active bank in securitizing Mexican toll road revenues, having priced three deals to date. Its last transaction, Autopista del Mayab, priced on Februry 7 at a real rate of 9.25%. That deal raised Ps242.6 million (US$23.9 million) and carried a tenor of 17 years.

Competing brokerage Interacciones brought the most recent toll-road deal to market on June 27 of this year, when it priced a Ps412 million (US$40.6 million) deal at a real 8.5%. That bond carried a 15-year tenor.

Historically tight interest rates and a wobbly currency are likely to deter toll roads from venturing across the Rio Grande in the foreseeable future. "I don't see any toll-road issues in dollars in the short-term," said Santiago Corniado, director at Standard & Poor's Mexico. What is more, a spike in interest rates after a Sept. 23 monetary crunch was short-lived, barely denting the appeal of pesos for local issuers, according to Eduardo Avila, chief economist at Interacciones.

A pick-up in economic activity along many toll road routes is likely to spur some operators to tap markets. "Things are looking favorable for a number of highways," Avila said.

Within the local market, the attraction of issuing in inflation-indexed UDIs will likely hold among toll roads. "Under current conditions they can issue in pesos or in UDIs, but their tariffs are indexed to inflation," Corniado said. Indeed all the past deals have been in UDIs. The inflation hedge offered by UDIs is a draw for investors as well.

Not all has been smooth going for Mexico's toll road sector. While recent bonds have successfully ridden out market bumps, a wave of debt deals in the sector during the mid nineties fell apart due to fragile structures, according to Corniado.

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