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Announcement:

Moody's lowers Green Bond Assessment on Mexico City Airport Trust's Senior Secured Notes to GB5 from GB1

04 Dec 2018

Action affects Senior Secured Notes due 2026, 2028, 2046 and 2047

New York, December 04, 2018 -- Moody's Investors Service has today lowered the Green Bond Assessment (GBA) on the Senior Secured Notes issued by Mexico City Airport Trust NAFIN F/80460 (MEXCAT, Baa3 ratings under review for downgrade) to GB5 from GB1. This action affects four tranches of Senior Secured Notes issued by the trust, including $1 billion 4.25% Notes due 2026 and $1 billion 5.5% Notes due 2046 that were issued in September 2016, as well as $1 billion 3.875% Notes due 2028 and $3 billion 5.5% Notes due 2047 that were issued in September 2017. The Notes were originally issued to finance a portion of a new airport project in Texcoco, State of Mexico ("Texcoco Airport"). This action does not affect the outstanding credit ratings on the Notes.

ASSESSMENT RATIONALE

"The GB5 reflects our expectation that the Texcoco Airport, as originally evaluated, will no longer exist," said Moody's green bond analyst Matthew Kuchtyak. "In theory, the government could reallocate the proceeds into other eligible green projects, but we are not incorporating that into our analysis at this time."

The lowering of the GBA to GB5 from GB1 primarily reflects the cancellation of Texcoco Airport project, which we expect will occur in the coming months. At this time, legal cancellation of the project has not yet occurred, and the issuer confirms that construction on the new project continues. However, Moody's incorporates a view that the new Mexican government's intention to cancel the project, coupled with the publication of a press release on 3 December outlining the terms of a cash tender offer and consent solicitation plan, is sufficient to confirm a view that the project will not be completed as originally factored into the GBA.

In the Moody's Green Bonds Assessment methodology, 40% of the overall assessment score reflects whether issuers allocate green bond proceeds to qualifying environmental projects. Because the net bond proceeds will no longer be utilized to finance part of the $13.3 billion airport project, Moody's has changed the Use of Proceeds score in our GBA to 5 from 1, thus lowering the overall assessment to GB5 from GB1.

MEXCAT is seeking to purchase up to $1.8 billion of the four series of Notes originally issued to fund the construction of the Texcoco Airport. At the same time, MEXCAT is requesting investors consent to modify the Notes Indentures to remove certain 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.

Adjusting the Indenture reflects 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 Passenger Airport Usage Fee (TUA) pledge of the existing airport which provided a debt service coverage ratio of 1.5x for the first six months of 2018.

Between 25-28 October, voters in Mexico elected to halt construction on the Texcoco Airport. While the vote is non-binding, the new Mexican government that took office on 1 December, has announced that it would abide by the outcome of the public consultation and discontinue the construction of the new airport. Although the new national government has not yet officially canceled the airport, Moody's believes the government will follow through on its commitment to eventually cancel the airport project, and instead build two additional runways at Santa Lucia, an existing military airport that would operate alongside the current Mexico City airport.

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 concession to operate the Texcoco Airport and indirectly through Aeropuerto Internacional de la Ciudad de México S.A. de C.V. the concession to operate the existing airport in Mexico City. Under the current Indentures, an action from the government to cancel the concession of the Texcoco Airport or affect the proceeds from that airport may constitute an Event of Default.

The principal methodology used in this analysis was Green Bonds Assessment (GBA) published in March 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

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.

Matthew Kuchtyak
Analyst
Infrastructure Finance Group
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

Jim Hempstead
MD - Utilities
Infrastructure 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.
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