Mexcat gains consents, tenders for ‘majority’ of four note series

New York, Dec. 19 – The Ministry of Finance and Public Credit received tenders and consent from holders of a “substantial majority” of Mexico City Airport Trust’s notes.

The revised early tender and consent deadlines and withdrawal deadline in the contentious offer expired at 5 p.m. ET on Dec. 19.

Holders gave “overwhelming support” to the consent solicitation and tender offer, the ministry said in a news release.

By the early deadline it had received tenders and consents for “a substantial majority” of each series of notes.

Details of the response were not announced.

The ministry “recognizes and acknowledges the cooperation of the international investment community in ensuring a successful outcome for this transaction,” the statement added. “The Ministry of Finance and Public Credit looks forward to a continued mutually beneficial relationship with all stakeholders and a bright future for infrastructure development in Mexico.”

Following opposition from holders, the offer was revised and despite continuing objections the ministry declined to make further changes, saying on Dec. 17 that: “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.”

It said it believed it had met the principal concerns of the objecting holders.

Ad hoc group opposition

As reported on 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 was 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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