MXN 600 million debt affected
Mexico, April 01, 2011 -- Moody's de Mexico has assigned debt ratings of Aa3.mx (Mexico National
Scale) and Baa3 (Global Scale, local currency) to a MXN 600 million
enhanced loan contracted by the State of Quintana Roo's Instituto
para el Desarrollo y Financiamiento (IDEFIN) with HSBC, which has
been on-lent to the State of Quintana Roo.
In the case of this loan, IDEFIN has on-lent the proceeds
to the State of Quintana Roo, based on mirror contracts, and
the state will service the loan via federal participation transfers.
In the loan contract, the State of Quintana Roo has pledged 7%
of its federal participation revenues to a trust (Banco Santander,
F/2001613), which will be used as a mechanism for debt service payment.
This loan will share a master trust with eight other loans, each
backed by a defined percentage of participation revenues. In case
that participation revenues are not sufficient for paying debt service
on any of the loans, the state has the obligation to send additional
revenues to the trust in order to make up the shortfalls.
The loan is denominated in Mexican pesos, with maturity of 15 years
and a grace period of up to 18 months for principal payments. The
loan will pay an interest rate composed of the 28-day Mexican Interbank
Interest Rate (TIIE) plus 175 basis points. Proceeds will be used
for infrastructure projects.
The Baa3/Aa3.mx ratings assigned to the loan reflects the underlying
creditworthiness of the State of Quintana Roo (Ba2/A2.mx) supported
by the following legal and credit enhancements embedded in the loan contracts:
1. Strong trust structure based on an irrevocable notification
to the federal treasury (TESOFE) to transfer the rights and flows of participation
revenues to the trustee, eliminating commingling risk.
2. Solid level of reserve funds that provide 3x debt service coverage
over the life of the loan, constituting a cushion against payment
3. Estimated cash flows generate solid debt service coverage ratios.
Under a Moody's base case scenario, cash flows for the loan are
projected to provide 3.3x debt service coverage at the lowest point
during the life of the loan. Under a Moody's stress case scenario,
estimated cash flow for the loan are projected to provide 3.0x
debt service coverage at the lowest point during the life of the loan.
Debt service coverage projections consider an interest rate CAP for the
first three years of the life of the loan contracted by the State of Quintana
Roo. The other loans in the master trust have displayed strong
historical cash flows resulting in an average debt service coverage of
5.5x times during 2009 and 2010, a period that includes a
deep fall in participation transfers.
4. In the event that the underlying loan contracts between IDEFIN
and the State of Quintana Roo were to be annulled or not respected,
IDEFIN would not have any available revenues to pay debt service on the
HSBC loan. However, this risk is offset by the state's moral
obligation, which arises from the IDEFIN's role as the financing
arm of the state, and the fact that the State of Quintana Roo's
instructions to TESOFE are irrevocable.
A downgrade of the State of Quintana Roo's issuer rating could exert
downward pressure on debt ratings for this loan.
Overview of IDEFIN
IDEFIN is a public decentralized entity of the State of Quintana Roo,
created on October 6, 2006. Its purpose is to assist the
state, its municipalities, and decentralized entities in accessing
credit. As such, IDEFIN can act as a lender, borrowing
from financial institutions or the market and then on-lending to
the state or another entity. Depending on the loan contract,
IDEFIN covers debt service obligations using revenues that flow from these
The last rating action with respect to IDEFIN and the State of Quintana
Roo was taken on February 10, 2011, when Baa2/Aa2.mx
ratings were assigned to the following two state loans:
- Scotiabank: MXN 700 million
- Banorte: MXN 700 million
The principal methodologies used in these ratings were Regional and Local
Governments Outside the US, published in May 2008, The Application
of Joint Default Analysis to Regional and Local Governments, published
in December 2008, and Enhanced Municipal and State Loans in Mexico,
published in January 2011.
Moody's National Scale 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 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 ".mx"
for Mexico. For further information on Moody's approach to national
scale ratings, please refer to Moody's Rating Implementation Guidance
published in August 2010 entitled "Mapping Moody's National Scale
Ratings to Global Scale Ratings."
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parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
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a credit rating.
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Please see ratings tab on the issuer/entity page on Moodys.com
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Moody's de Mexico S.A. de C.V
MD - Sub-Sovereigns
Moody's Investors Service Ltd.
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Moody's de Mexico S.A. de C.V
Moody's Assigns Baa3/Aa3.mx debt ratings to an enhanced loan of the State of Quintana Roo's Instituto para el Desarrollo y Financiamiento (IDEFIN) contracted with HSBC
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000