Mexico’s Fideicomiso de Apoyo para el Rescate de Autopistas Concesionadas trust holds an estimated $35 billion in toll road concessions. These will be developed over the next five years through 11 packages totalling 45 roads sold through auctions. The first package of four toll roads was sold in a 30-year public-private partnership to Goldman Sachs Infrastructure Partners and ICA, a Mexican construction company. Last month Santander designed, structured and solely underwrote a transaction to pay for the acquisition – a deal that has big implications for Mexico’s local capital markets, as well as toll road development.
The financing was Ps37.1 billion ($3.3 billion) of senior secured debt, syndicated via eight other banks despite the difficult market conditions. The transaction is the biggest private bank financing for a private borrower in Mexico and the largest infrastructure financing in the country.
The financing demonstrates just how far Mexico has come in recent years. This is the country that, following a currency and banking crisis in the mid-1990s, suffered the default of a number of private sector toll road concessions financed in US dollars. The deal also shows the potential of Mexico’s local currency market in its ability to absorb large chunks of financing.
"Nothing like this has been done in Mexico before," says Octaviano Couttolenc, managing director of structured finance at Santander Mexico. "This sets a very strong precedent for future deals." Local-currency funding was the most appropriate mechanism, adds Couttolenc, since revenue from the toll roads is denominated in pesos and linked to inflation for the life of the 30-year concession, and takeout most likely will occur in the same currency. "We didn’t want to expose the project to currency risk," he says. "The derivatives market for some tenors still tends to be illiquid, therefore we wanted to avoid foreign-currency risk."
Other features of the transaction include a seven-year mini perm structure and a syndication process that closed in 30 days. The timing of the takeout for the facility has yet to be determined.
Santander offered dollar lenders that wanted to participate in the transaction peso swaps, although bankers warn that care must be taken about the timing and the value of when the swaps get funded.
The ICA and Goldman Sachs consortium paid Ps44.05 billion for the concession. Six other consortiums bid for the contract.
Couttolenc expects the Mexican government to sell the next two toll road packages over the next few months. "I doubt any country in the region has such a large programme with such a clear process," he says.