Rating Action: Moody's assigns Baa1/Aaa.mx debt ratings to 42 bank loans of Fideicomiso CIB/3484
Global Credit Research - 28 Aug 2020
Mexico, August 28, 2020 -- Moody´s de México, ("Moody´s") assigned debt ratings of Baa1 (Global Scale, local currency) and Aaa.mx (Mexico National Scale) to each of the 42 bank loans of Fideicomiso CIB/3484.
Fideicomiso CIB/3484, a special purpose vehicle, acquired MXN 80 billion denominated in Mexican pesos through the following 42 bank loans:
1. Afirme MXN 250 million 2. BanBajío MXN 2,000 million 3. BanBajío MXN 1,000 million 4. BanBajío MXN 1,000 million 5. BanBajío MXN 1,000 million
6. Banco Azteca MXN 1,500 million
7. BBVA MXN 2,000 million 8. BBVA MXN 4,000 million 9. BBVA MXN 2,000 million 10. BBVA MXN 4,000 million 11. BBVA MXN 3,000 million
12. Banobras MXN 2,500 million
13. Banobras MXN 2,500 million
14. Banobras MXN 2,500 million
15. Banobras MXN 2,500 million
16. Banobras MXN 2,500 million
17. Banobras MXN 2,500 million
18. Banobras MXN 5,000 million
19. Banobras MXN 5,000 million
20. Banorte MXN 1,000 million
21. Banorte MXN 1,000 million
22. Banorte MXN 1,500 million
23. HSBC MXN 500 million
24. HSBC MXN 1,000 million
25. Inbursa MXN 2,000 million
26. Inbursa MXN 4,000 million
27. Inbursa MXN 7,000 million
28. Inbursa MXN 4,000 million
29. Inbursa MXN 3,000 million
30. Intercam MXN 500 million
31. Intercam MXN 500 million
32. Monex MXN 500 million
33. Monex MXN 500 million
34. Multiva MXN 500 million
35. Multiva MXN 500 million
36. Multiva MXN 500 million
37. Santander MXN 1,000 million
38. Santander MXN 1,000 million
39. Santander MXN 1,000 million
40. Santander MXN 1,000 million
41. Santander MXN 250 million
42. Ve por más MXN 500 million
The loans have a maturity of 15 years and charge monthly interest and principal payments with no grace period. The loans charge an interest rate comprised of the 28-day Mexican Interbank Interest Rate (TIIE in Spanish) plus a weighted average spread of 217.5 basis point. The proceeds of the loans will be directed to all Mexican states to help mitigate the drop in non-earmarked transfers "participaciones" resulting from the fall of the pool of federal taxes and oil revenues shared with the states (Recaudación Federal Participable -- RFP) stemming from the economic contraction.
The Baa1/Aaa.mx debt ratings assigned to each of the 42 bank loans reflect the key role of the Government of Mexico (Baa1/Aaa.mx negative) as it will provide, on behalf of the states, any required amounts to the trust, as well as, the credit quality of the revenues that flow to the trust Fideicomiso CIB/3484. The trust payments will be backed by future cash flows of the Fondo de Estabilización de los Ingresos de las Entidades Federativas (Stabilization fund) and the Federal Government's advances to the trust, these advances will be compensated from future "participaciones". The stabilization fund is used to cover shortfalls between budgeted and observed non-earmarked federal transfers or participaciones. Should the stabilization fund cash flows prove to be insufficient to meet the terms of the structure (highlighted below), the Federal Government is obligated to provide necessary amounts on behalf of the states, directly to the trust, and then compensate from future states' "participaciones" the amount it has advanced to the trust. This repayment mechanism further ensures that the Government of Mexico will send payments to the trust, on behalf of the states, in a timely manner.
The ratings also are supported by the following legal and credit enhancements embedded in the structure:
1. Individual agreements between Mexican states and the Federal Government to advance required amounts to the trust to cover for any payment required by the trustee. Each state allows the Federal Government to compensate from future "participaciones" the amount it has advanced to the trust. Maximum amount to be advanced in a fiscal year will be up to 4% of states' annual Fondo General de Participaciones (fund that is equivalent to 20% of RFP). Moody's assumes that all Mexican states have gone through their own administrative and legal processes to obtain authorization to participate in this program.
2. Individual letters signed by Mexican states to the Ministry of Finance and Banobras - the trustee of the stabilization fund- in which they give irrevocable instructions to send to the trust the following cash flows: 100% of future revenues from Fondo Mexicano del Petroleo (FMP) and 80% of surplus revenue received to the stabilization fund. Revenues from FMP will pay debt service and remaining amounts will be used to prepay principal. Surplus of the Federal Government that is transferred to the stabilization fund will be mainly used to make prepayments of principal.
3. Strong trust structure as a source of payment that isolates the structure from states' credit risks.
4. Estimated available cash flows to pay for advanced amounts provided by the Federal Government, and equivalent to 4% of the annual states' FGP, generate solid debt service coverage ratios. Under Moody's base case scenario, these available cash flows are projected to provide 2.6x debt service coverage at the lowest point over the life of the debt structure. Under Moody's stress case scenario, estimated cash flows are projected to provide 2.0x debt service coverage, at the lowest point.
5. A solid level of reserves of at least 2 months of debt service, providing sufficient cushion against payment delays.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the links between the structure and the credit quality of the Government of Mexico, an upgrade of Government of Mexico's issuer ratings would likely result in an upgrade on the Global Scale ratings. Conversely, a downgrade of Government of Mexico's issuer ratings would likely result in a downgrade on the ratings. Additionally, a fall in debt service coverage from pledged revenues or the FGP, materially below our expectations would exert downward pressures on the ratings.
The principal methodology used in these ratings was Enhanced Municipal and State Loans in Mexico Methodology published in May 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1157935. Alternatively, please see the Rating Methodologies page on www.moodys.com.mx for a copy of this methodology.
The period of time covered in the financial information used to determine Fideicomiso CIB/3484's rating is between 01 January 2015 and 31 December 2019 (source: Ministry of Finance information).
Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in May 2016 entitled "Mapping National Scale Ratings from Global Scale Ratings". While NSRs have no inherent absolute meaning in terms of default risk or expected loss, a historical probability of default consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. For information on the historical default rates associated with different global scale rating categories over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1216309.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's information.
The ratings have been disclosed to the rated entity prior to public dissemination.
A general listing of the sources of information used in the rating process, and the structure and voting process for the rating committees responsible for the assignment and monitoring of ratings can be found in the Disclosure tab in www.moodys.com.mx.
The date of the last Credit Rating Action was 19/07/2020.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.mx.
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This credit rating is subject to upgrade or downgrade based on future changes in the financial condition of the Issuer/Security, and said modifications will be made without Moody's de México S.A. de C.V accepting any liability as a result.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
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Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.
Please see Moody's Rating Symbols and Definitions on www.moodys.com.mx for further information on the meaning of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com.mx for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see our website www.moodys.com.mx for further information.
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The ratings issued by Moody's de Mexico are opinions regarding the credit quality of securities and/or their issuers and not a recommendation to invest in any such security and/or issuer.
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Maria del Carmen Martinez-Richa Vice President - Senior Analyst Sub-Sovereign Group Moody's de Mexico S.A. de C.V Ave. Paseo de las Palmas No. 405 - 502 Col. Lomas de Chapultepec Mexico, DF 11000 Mexico JOURNALISTS: 1 888 779 5833 Client Service: 1 212 553 1653 Yves Lemay MD-Sovereign/Sub Sovereign Sub-Sovereign Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's de Mexico S.A. de C.V Ave. Paseo de las Palmas No. 405 - 502 Col. Lomas de Chapultepec Mexico, DF 11000 Mexico JOURNALISTS: 1 888 779 5833 Client Service: 1 212 553 1653
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