Mexcat holds firm on revised tender terms for four series of notes

By Susanna Moon

Chicago, Dec. 17 – The Ministry of Finance and Public Credit issued a statement about Mexico City Airport Trust’s revised tender offers and consent solicitations.

“The revised offer was made after considering feedback received from a wide variety of market participants, and it includes significant enhancements in the interests of noteholders,” according to the statement.

“The effect of the offer would reduce Mexcat’s total debt outstanding by up to 30%. The revised offer also establishes principal accumulation accounts, which are expected to reduce total net debt outstanding by a minimum of an additional $1 billion within five years, resulting in a total reduction in outstanding net debt of up to 46%.”

“We are confident that the reductions in net debt and other enhancements address the principal concerns raised by the holders and represent a balanced and market-friendly transaction given the policy objectives of the Mexican government,” the release continued.

“We understand that the reaction of the market has been strongly positive with respect to the revised terms. The financial institutions appointed by Mexcat as dealer managers have been in regular, direct communication with noteholders with positions of all sizes, which was the basis of the revised terms.”

Mexcat said it has also been in contact with advisors to an ad hoc group of holders, “who have declined, despite repeated requests, to provide the identities or holdings of the group.”

“The points advanced by those advisors have been reviewed with them and considered. However, we believe the revised offer addresses the principal concerns of the noteholders,” the release said.

Mexcat does not plan to amend the terms any further, the release noted.

“We believe the transaction as amended is a balanced and commercial approach to the interests of the noteholders, Mexcat and the Mexican public,” the release added.

If the revised offer is not accepted, Mexcat and the Mexican government will consider other options “to achieve the government's objectives.”

Ad hoc group opposition

As reported Dec. 12, an ad hoc group of holders hired Houlihan Lokey as a financial adviser.

The holders had released a statement two days before saying that it represented holders of more than 50% of the total $6 billion principal amount of bonds covered by the issuer’s ongoing Dutch auction tender offer and consent solicitation.

The group said it also represents holders of more than 50% of at least one series of the bonds covered by the offer.

The tender offer is for up to $1.8 billion of Mexcat’s $6 billion of four series of international notes.

The ad hoc group is also represented by Hogan Lovells.

Monday’s statement was a follow-up to a statement released by the group on Dec. 4, at which time the group said it had “some concerns” over the tender offer.

The ad hoc group said at that time that it “was not consulted by the issuer in advance of the dissemination of MexCat’s tender offer and consent solicitation, but has now reviewed it, and has some concerns such that it cannot support the proposal in its current form,” the release states.

These concerns, according to last week’s release, include

• In connection with the new airport, the release and removal of collateral and events of default under relevant documentation;

• In connection with the existing airport, the potential for reductions in collateral upon the utilization or development of alternate or additional Mexico City area airports, whether in the near term or longer term;

• Further potential reduction in collateral with respect to the liberalization of the restricted payments test in two of the four bond series; and

• Tendering bondholders are deemed to consent to the collateral releases and covenant and event of default changes even though all tendered bonds may not be purchased in full, and even if tendered bonds are purchased, the early tender and consent fees are included in, and not in addition to, the minimum acceptable bid price.

Amended tender offer terms

Mexcat announced the tender offer for $6 billion of four series of notes on Dec. 3.

Along with the tender offers, the issuer is soliciting consents to amend the note indentures to reflect policy changes for the plan to develop a proposed new airport to serve Mexico City and the surrounding areas, according to a previous announcement.

The issuer then said on Dec. 11 that it was amending the offers in response to noteholders and other interested parties.

Mexcat will now purchase up to $1.8 billion principal amount of notes, and up to a pro rata principal amount of each series of notes, at par plus interest. The original tender offers used a reverse Dutch auction mechanism to determine the price, within a range that was capped at par.

The notes covered by the tender offers are as follows:

• $1 billion of 4¼% senior secured notes due 2026;

• $1 billion of 3 7/8% senior secured notes due 2028;

• $1 billion of 5½% senior secured notes due 2046; and

• $3 billion of 5½% senior secured notes due 2047.

The revised offers also increased the consent payment to $10 per $1,000 principal amount of notes, which will be payable both to noteholders who tender their notes and noteholders who deliver their consents to the proposed amendments but do not tender their notes. The consent fee will be included in the early tender payment for those noteholders who tender their notes. Originally, the issuer offered a consent payment of $7.50 per $1,000 of notes.

One of the new proposed amendments added an event of default that will be triggered if either commercial operations have commenced at an alternative airport within a 70-kilometer radius of the Benito Juarez International Airport or commercial operations have expanded at the existing Toluca airport to at least 5 million passengers per year and Mexcat's debt service coverage ratio is below a specified level.

Amendments also included a provision to further protect bondholders against reductions in the rates of passenger charges collected at the Benito Juarez International Airport.

A third amendment established a mechanism to segregate funds every quarter for the repayment of principal on the notes at maturity, as well as to fund repurchases of notes in the open market, through tender offers or otherwise, and to pledge those funds as additional security for the notes.

A fourth amendment significantly limits Mexcat's ability to incur new debt.

The early tender and consent deadlines and withdrawal deadline were extended to 5 p.m. ET on Dec. 19 from 5 p.m. ET on Dec. 17. The offers were extended to 11:59 p.m. ET on Jan. 4 from 11:59 p.m. ET on Jan. 2.

Citigroup Global Markets Inc. (800 558-3745 or 212 723-6106), HSBC Securities (USA) Inc. (888 HSBC-4LM or 212 525-5552) and J.P. Morgan Securities LLC (866 846-2874 or 212 834-7316) are the dealer managers. Global Bondholder Services Corp. (212 430-3774 or 866 470-4500) is the depositary and information agent.

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