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I AGREE
16 Mar 2011
Mexico, March 16, 2011 -- Moody's de Mexico has assigned a debt rating of Aa3.mx (Mexico
National Scale) to the Comisión Estatal de Servicios Públicos
de Tijuana´s (CESPT) MXN 280 million own-source revenue backed
loan from Banorte. Moody's Investors Service has assigned a debt
rating of Baa3 (Global Scale, local currency) to this loan.
The MXN 280 million loan from Banorte refinances a previous loan and is
payable through a trust (BBVA Bancomer, F 47995-6),
to which CESPT has pledged 15% of water collection rights for this
loan. The loan, which is denominated in Mexican pesos,
with maturity of 20 years, will pay an interest rate composed of
the 28-day Mexican Interbank Interest Rate (TIIE) plus a spread
of 400 basis points.
Debt service on the loan will be paid from pledged non-restricted
own-source revenues, flowing from CESPT´s accounts,
and its external agents, to a trust run by BBVA Bancomer.
The pledged revenues consist of water tariffs. Under the trust
agreement, CESPT is not ceding the rights to collect these revenues
to the trust, rather, CESPT engages to deposit the revenues,
once collected, into the trust. CESPT's external collection
agents, including banks and stores, have signed irrevocable
mandates to deposit the revenues they collect on behalf of CESPT into
the trust.
Rating Rationale
Notwithstanding the legal and credit enhancements embedded in the loan,
the Baa3/Aa3.mx ratings assigned to the loan reflect our assessment
that the underlying credit risks of the loan are, nevertheless,
in-line with the issuer ratings assigned to CESPT (Baa3/Aa3.mx).
Credit Enhancements:
1. No impact on CESPT debt levels, as the loan refinances
a previous loan.
2. Validity of the legal authorization of the transaction,
which authorizes the trust to be used as a mechanism for debt service
payment. CESPT has ceded 15% of water tariffs revenue to
cover debt service of this loan.
3. Solid debt service coverage ratios. Under a Moody's base
case scenario, projected cash flows generate 2.3x debt service
coverage at the lowest point during the life of the loan. Under
a Moody's stress case scenario, projected cash flows provide
2.1x debt service coverage, at the lowest point during the
life of the loan.
4. Strong level of reserve funds that represent 3.0x debt
service coverage over the life of the loan and provide a solid cushion
against payment delays.
5. Interest rate exposure is expected to be limited by an interest
rate cap at 7.5% that has to be renewed every two years
over the life of the loan.
Credit Challenges:
1. The credit quality of the cash flows entering into the trust
are directly tied to CESPT´s fundamental credit characteristics.
2. CESPT ultimately retains control over the collection of the
pledged revenues. As such, if faced with a stress scenario,
CESPT could violate the terms of the contracts by diluting cash flows
to the trust through the addition of new external agents, or CESPT
could withhold revenues collected from its own offices. The risk
of this occurring, although remote, is captured by CESPT´s
issuer ratings.
3. The loan contains a cross default clause stating that if CESPT
defaults in any other loan with Banorte, or if an early amortization
event is triggered in any contract between CESPT and any other entity
of Grupo Financiero Banorte, then Banorte has the right to claim
the full repayment of this loan. This early amortization clause
ultimately limits the potential uplift provided by the other legal and
credit enhancements embedded in the structure, as it provides a
mechanism for transmitting fundamental credit risks of CESPT to the loan.
4. The loan also contains an early amortization clause stating
that, if the assigned rating is Aa3.mx or below, the
bank could trigger early amortization of this loan. While this
constitutes a credit negative, we view refinancing risks linked
to this event as being limited. The loan amount only represents
14.9% of total outstanding debt or 14.5% of
CESPT's total revenues, a manageable level within CESPT´s
financial framework. Furthermore, we have also verified that
the other six loans of CESPT do not present cross default clauses that
could be triggered by declaring this loan due and payable.
Last rating action was in September 27, 2007, when Moody's
assigned issuer ratings of Baa3 (Global Scale) and Aa3.mx (Mexico
National Scale) to the Comisión Estatal de Servicios Públicos
de Tijuana (CESPT).
The principal methodologies used in this rating were The Application of
Joint Default Analysis to Government Related Issuers published in July
2010 and Moody's Approach to Rating Mexican States' Securitizations Back
by Future Flows of Own-Source Revenues published in September 2008.
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."
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Mexico
Maria del Carmen Martinez-Richa
Asst Vice President - Analyst
Sub-Sovereign Group
Moody's de Mexico S.A. de C.V
JOURNALISTS: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700
London
David Rubinoff
MD - Sub-Sovereigns
Sub-Sovereign Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
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: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700
Moody's Assigns Debt Ratings to a MXN 280 Million Own-Source Revenue Backed Loan of Comisión Estatal de Servicios Públicos de Tijuana (CESPT)
No Related Data.
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