Mexico Airport Said to Raise $1.6 Billion in Record Fibra Sale

(Bloomberg) -- The group behind Mexico City’s new airport raised $1.6 billion in an initial public offering of Fibra E shares Friday, providing another buffer against threats to shut the endeavor down.

Grupo Aeroportuario de la Ciudad de Mexico, or GACM, sold 300 million of the securities at 100 pesos each to raise 30 billion pesos, including an overallotment option known as a greenshoe, according to a person with knowledge of the deal, who asked not to be identified because the information is private. It was the biggest-ever sale of Fibra E securities in Mexico. The state-backed electricity company raised $759 million last month.

The idea for the sale, coming less than four months before Mexico’s presidential election, was that entangling more investors in the $13.3 billion project and securing capital from local investors to help ramp up construction will make it that much harder for a future administration to unravel it. Andres Manuel Lopez Obrador, who is leading rivals in polls, has pledged to cancel construction if he wins, calling the airport a gift to contractors that’s steeped in corruption.

The offering attracted local and foreign investors, said the person.

The new airport is part of a plan unveiled by President Enrique Pena Nieto at the beginning of his six-year term to rekindle growth by spending on public works and is due to open by the end of 2020 to replace the overstuffed Benito Juarez International Airport. The Mexican government is contributing about $8 billion to the project, according to the prospectus for last year’s bond issue.

Presidential vote

Lopez Obrador, a former Mexico City mayor, has said he wants to replace plans for the new airport with a less expensive project to build two new runways at a military base 30 miles away and open it to commercial flights. Earlier this week, he said he is considering seeking injunctions to prevent Mexico from awarding new airport contracts in the months leading up to the election.

Pena Nieto announced the creation of the Fibra E in 2015 as part of a larger plan to increase opportunities for Mexico’s pension funds and insurance companies to invest in public works. The instrument is a hybrid between a master-limited partnership and a REIT. Through the structure, earnings are essentially tax-free and the trust has to pay out 95 percent of revenues to investors.

Part of the construction of the airport is also being funded by $6 billion of bonds sold by an airport trust that gives lenders exclusive claim on passenger tariffs, first at the old airport and then at the new one. The debt includes a provision that requires immediate repayment of the principal and interest if a governmental change interrupts the flow of passenger tariffs that have been pledged exclusively to the trust, according to a regulatory filing.

Credit Suisse Group AG was the lead global coordinator for the offering. Citigroup Inc., BTG Pactual, Banorte, Banco Bilbao Vizcaya Argentaria SA, Grupo Financiero Banorte SAB, Banco Santander SA and Grupo Financiero Inbursa SAB also helped underwrite the deal, while Banobras was the structuring agent.

To contact the reporter on this story: Michelle F. Davis in Mexico City at mdavis194@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Brendan Walsh, Andrew Dunn

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