Mexican Government Under Pressure to Improve Airport Bond Deal

12-06-2018 – Bloomberg

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Photographer: Brett Gundlock/Bloomberg

By Justin Villamil and Pablo Rosendo Gonzalez

Investors in Mexico City’s planned airport project want a lot more from the government before they agree to its buyback offer.

An explicit federal guarantee to honor the debt would go a long way toward resolving concerns, according to chats with more than half a dozen bondholders who asked not to be identified before any formal talks are held. Barring that, the government should agree to buy back a larger portion of the bonds or offer higher compensation for investors who hold onto the notes but agree to waive the terms set forth when the bonds were sold, they said.

President Andres Manuel Lopez Obrador’s administration is struggling to attract support for its proposal to end a standoff with investors who loaned $6 billion to construct a new Mexico City airport, a project that the new president wants to scrap. An offer to buy back about $1.8 billion of the bonds for as little as 90 cents on the dollar and provide less than 1 cent in compensation for investors who agree to waive their right to declare an immediate default when construction ends has been rejected by an ad hoc group of bondholders who say they own more than 50 percent of one of the notes, enough to block the deal from going through.

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