Way paved for cancellation of Mexico City airport - AMLO

The way is now paved for the formal cancellation of the project to build a new 285bn-peso (US$14.3bn) international airport for Mexico City and to begin construction of a similar but more affordable facility at the Santa Lucía military air base, according to Mexican President Andrés Manuel López Obrador (AMLO).

The president's remarks came amidst news that a majority of those holding the US$6bn in bonds that were issued to fund the construction of the mega airport have now accepted the new government's offer to buy back up to US$1.8bn of that debt.

"The offer has received overwhelming support from the bondholders. MEXCAT received offers and the consent of a substantial majority of those holding bonds in every single one of the series issued," the finance ministry said in a release.

The ministry thanked the international investors for their cooperation in the success of the transaction and said that it "wishes to continue maintaining a constructive, transparent and mutually beneficial relationship for all the main actors involved."

The initial offer was made by the Mexico City Airport Trust (MEXCAT), on behalf of state holding company GACM, in New York on December 3. The offer was improved on December 11 when the price was raised to the full face value of the bonds plus accrued and unpaid interest.

December 19 had been scheduled as both the early tender/consent and withdrawal deadlines. The offer officially expires on January 4.

The buyback offer was meant to serve as a sign to investors that authorities would honor all financial obligations in spite of the decision to cancel the project, which was made in late October via a referendum.

Along with the cash tender offer, MEXCAT issued a consent request to remove references to the ill-fated Texcoco airport, so the transaction is structured only around fees collected at the Mexico City international airport.

The acceptance of the offer took place despite claims by the MEXCAT Ad Hoc Bondholder Group, which reportedly comprises investors holding 50% of the bonds that were originally issued in two separate offers by MEXCAT, that they were not going to support the proposal.

The finance ministry did not provide information on the exact percentage of bondholders that accepted the offer.

WHAT'S NEXT?

At his daily press conference on Thursday, AMLO said that the negotiation with the bondholders was the hardest part of the cancellation process and that, due to the creditor's acceptance of the offer, the Santa Lucía international airport project would now be able to move forward.

"[The negotiations with those who invested in] the Fibra E securities is what's coming next, and then the agreement with contract holders," the president noted.

"We're honoring our commitment to back, support and protect investors," he added.

The offering of the FIBRA E securities took place in March, and raised 30bn pesos. Mexico's pension fund managers, the Afores, purchased 80% of the issue.

SANTA LUCÍA

AMLO also confirmed that the Mexican army will be responsible for turning the Santa Lucía air base into an international airport, pointing to the funds that were earmarked for that purpose in the spending budget proposal the finance ministry submitted to congress for approval.

"We are entrusting the construction of the runways, the terminal building and everything else to the army," the president said.

AMLO is set to meet transport and communiations minister Javier Jiménez Espriú and officials from the defense ministry (Sedena) later on Thursday to discuss the progress on the project's final design, which according to the president is "practically complete."

Authorities are now awaiting the completion of a report commissioned from foreign firms, which will serve to define the exact locations of the two new runways.

According to AMLO, there is already a project for the infrastructure that will be used to link Santa Lucía with the existing Mexico City airport (AICM), with a preliminary budget officially estimated.

The architectural model that was used in the construction of a second terminal at AICM, which was opened in 2007, will also be used at Santa Lucía in order to reduce construction costs. The existing runway serving the air base will continue to be used for the project. "We are still deciding whether to expand it or not," AMLO said.

Asked about the companies that were awarded contracts to perform works at the mega airport, the veteran politician said that projects such as the Maya train, the construction and rehabilitation of highways and a new oil refinery will provide construction firms with plenty opportunities to participate in the public infrastructure sector.