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Announcement:

Moody's continues to review Mexico City Airport Trust's ratings for downgrade

03 Dec 2018

New York, December 03, 2018 -- Moody's Investors Service ("Moody's") extended the review for downgrade of the Baa3 ratings on the $6 billion Senior Secured Notes issued by Mexico City Airport Trust NAFIN F/80460 ("MEXCAT").

RATINGS RATIONALE

Moody's statement follows the announcement by the Mexican government that MEXCAT will seek to purchase up to $1.8 billion of the four series of Notes originally issued to fund the construction of a new airport in Texcoco, State of Mexico ("Texcoco Airport). At the same time, MEXCAT will request investors consent to modify the Notes Indentures to remove covenants and events of default directly or indirectly connected with the concession to build and operate the Texcoco Airport. In addition, the consent request will seek investors approval to release security interest over the originally pledged future passenger usage fees generated by the Texcoco Airport as well as any other pledge of assets under the Indentures related to that proposed new airport.

The transaction seeks to adjust the Indentures to reflect the ongoing evaluation by the government on whether to cancel the development of the Texcoco Airport, while preserving a financing structure that was originally conceived for that purpose. More specifically, the government's announced intention is to avoid triggering an event of default under the current Indentures that could result from cancellation of the new airport. Investors will continue to benefit from the TUA pledge of the existing airport which provided a debt service coverage ratio of 1.5x for the first six months of 2018.

If successful, the partial purchase of the Notes will bring lower leverage that could strengthen MEXCAT's financial metrics relative to current metrics with the full $6.0 billion of debt.

Under the proposed transaction, investors can freely decide to participate in the tender and provide their consent to the proposed modifications to the terms of the Indentures. Investors can also choose to maintain their current positions and only provide their consent to the proposed modifications to the terms of the Indentures. The tender will be executed through a voluntary, reverse Dutch auction where Investors who wish to sell will offer a price in the range of $900-$1,000 per every $1,000 principal amount of Notes. The transaction requires that a simple majority of investors in each of the series agrees to the Consent. Investors will also receive a Consent payment.

The rating of MEXCAT reflects the application of Moody's joint default analysis ("JDA") framework for government related issuers. The rating action reflects a Baseline Credit Assessment ("BCA") of ba1 as a measure of MEXCAT's stand-alone creditworthiness. In addition, we consider a "High" default dependence between MEXCAT and the Government of Mexico (A3 stable). Moody's assumption of implied government support from the Government of Mexico is "Moderate". Our GRI framework results in a one-notch rating uplift from its stand-alone credit profile.

During the review Moody's will assess the degree to which the announced transaction, that we expect will conclude by January 2019, reduces debt and strengthens credit metrics of MEXCAT (ba1 BCA). In light of the government's evaluation on whether to cancel the airport and announce the proposed tender and consent transaction, the review will also reassess the dependence and support assumptions used in arriving at the one-notch uplift under Moody's GRI analysis.

WHAT COULD CHANGE THE RATING UP/DOWN

Although reduced debt stemming from completion of the tender offer would improve credit metrics in the near term, absence of the growth potential anticipated from the new airport combined with challenges posed by continuing to upgrade and operate the existing airport limit potential for a rating upgrade.

Any reduction in Moody's assessment of implied government support towards MEXCAT would exert negative pressure on the rating.

ABOUT MEXCAT

MEXCAT is a Mexican trust, where Nacional Financiera, S.N.C., Institución de Banca de Desarrollo ("NAFIN") acts as trustee, that in 2016 issued $1 billion 4.250% Senior Secured Notes due in 2026 and $1 billion 5.500% Senior Secured Notes due in 2046. In 2017 MEXCAT issued $1 billion 3.875% Senior Secured Notes due in 2028 and $3 billion 5.500% Senior Secured Notes due in 2047. The Notes are backed by the Passenger Airport Usage Fee ("TUA") from the current Mexico City International Airport and future TUA proceeds from a planned new international airport that would have been located in Texcoco, State of Mexico. Grupo Aeroportuario de la Ciudad de México, a majority government owned company, holds the concessions to operate both the existing airport in Mexico City as well as the Texcoco Airport . Under the current Indentures, an action from the government to cancel the concession of the Texcoco Airport or affect the proceeds from that airport constitute an Event of Default.

The methodologies used in these ratings/analysis were Privately Managed Airports and Related Issuers published in September 2017, and Government-Related Issuers published in June 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Adrian Garza
Vice President - Senior Analyst
Project Finance 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

A.J. Sabatelle
Associate Managing Director
Project Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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