Mexico looks to guarantee airport bonds as Navy takes over hub

Mexico is considering buying back up to $4.2 billion of debt owed by the capital’s principal airport as the Navy prepares to take over the transport hub, according to an official. 

The buyback is one of various options open to the government, which is looking to guarantee repayments on the debt, transportation undersecretary Rogelio Jimenez Pons said Wednesday at the sidelines of an aviation conference in Mexico City. 

“What’s most important right now is to give bondholders the certainty that the obligations that Mexico had with them will be met,” he said. Asked if those guarantees could include a buyback, Jimenez said “that’s a possibility, we’ll have to see how it’s done. We’re looking at all options.” 

Mexico’s President Andres Manuel Lopez Obrador has decided to hand over the Benito Juarez International Airport to the navy as part of a move to expand military oversight in key parts of the nation’s infrastructure, adding to its current role of overseeing security at the hub. He did not provide a timeline for the shift.

The decision adds to a broader move to put branches of the military in charge of important public projects, including building parts of the Maya Train line in the Yucatan peninsula, and managing seaports and air terminals, including the new Felipe Angeles, or AIFA, airport outside of Mexico City. 

At the start of his administration in 2018, AMLO, as the president is known, canceled the construction of the so-called Texcoco airport and moved to build the more spartan AIFA, while keeping the old Benito Juarez facility running.

Bond Anticipation

AMLO’s announcement confirms a report earlier this month by El Financiero that cited the airport’s chief executive. In it, the CEO, a retired admiral, said the navy refused to take over the airport under the current arrangement in which much of its revenue goes to pay the bonds for the Mexico City airport that was never built.

The report triggered a rally in the bonds, which were initially issued by Mexico City Airport Trust, as investors bet the government will offer new guarantees or eventually launch an offer to buy back the debt. The dollar notes are among the best performing Mexican corporate notes so far this month, according to a Bloomberg index. 

“No one knows precisely the details,” said Edgar Cruz, head of Latam credit at BBVA Mexico. “But a bond repurchase is a possibility.” 

The $2.1 billion of bonds due in 2047 climbed 7.5 cents this month to a more than one-year high, but have since pared gains amid uncertainty about exactly how the change in control will be carried out and how long it may take, Cruz said.