OPIC's First-ever Guaranty of Local Capital Market Bond Issuance Supports State of Mexico
September 8, 2010
WASHINGTON, D.C. – The Overseas Private Investment Corporation (OPIC) today announced its first-ever support of a local currency capital market bond issuance, guaranteeing 2.765 billion pesos of bonds (approximately $217 million) issued in the Mexican market. By relying on domestic rather than international investors, the project will expand Mexican capital markets and their ability to support infrastructure improvements in the country.
The 20-year bonds, part of an overall issuance of approximately $320 million, will be repaid from the future revenues of the Instituto de la Función Registral del Estado de Mexico (IFREM), a decentralized agency that has assumed the responsibilities of the State of Mexico’s Public Registry of Properties. Proceeds of the bonds will be used to modernize IFREM and other high-priority infrastructure investments within the State. The modernization will enable IFREM to provide enhanced service to the State’s residents, which will vastly improve the ability of home owners, investors and lenders to have legal certainty of title to property.
As a result, on any given day a home owner living in the State will now be able to register his or her home ownership with IFREM within days and have greater access to credit, thereby supporting investment and stimulating the local and national economy. At the same time, as a result of forthcoming investments in the State’s infrastructure, the home owner will have improved access to mass transit, basic utilities and health care.
“Strong local capital markets provide developing countries the means to improve their own financial and physical infrastructure by empowering domestic investors to take control of their economies,” said OPIC President and CEO Elizabeth Littlefield. “Domestic investors are best able to provide the long-term local currency debt that development projects require. We are pleased to announce OPIC’s first guaranty of a local bond issuance in Mexico, and hope it is the first of many to follow there and in other emerging markets.”
The transaction marks the first time OPIC has, with the presence of a U.S. private sector sponsor (MBIA Inc., a New York based financial services firm, through one of its indirect subsidiaries), supported a sub-sovereign entity in its efforts to raise capital for much-needed modernization and investment. It is also the first bond issuance in Mexico backed by property registry fees and will provide local capital markets investors with an investment-grade peso-denominated long-term asset rated AAA by Standard & Poor’s and Fitch ratings agencies. Done in accordance with international financial market standards with respect to credit underwriting, documentation, transparency and accountability, it is expected to serve as a catalyst for future high-grade issues.