Airport Bonds Show That Mexican Traders Learning to Live With AMLOBy
Green bonds backing $13.3 billion project gain most in Mexico
Investors comforted after Lopez Obrador moderated stance
Investors in at least one corner of Mexico’s markets are making peace with Andres Manuel Lopez Obrador.
Green bonds backing the construction of Mexico City’s new $13.3 billion airport have been among the country’s best performing debt in the past few weeks as the presidential front-runner often referred to as AMLO pledged to make sure holders of $6 billion of notes would be protected even as he reiterated promises to shut the endeavor down if he wins.
That reassured traders who were already gaining confidence after the group behind the airport raised $1.6 billion last month in an initial public offering of a REIT-like securities tied to the project, a move that created a broader base of investors who would object loudly to any attempts to derail it. The debt had lost 11 percent this year before the Fibra E offering as Lopez Obrador, a left-wing former mayor who is trying to shake the perception that he’s hostile to business, solidified his lead in pre-election voter polls.
“The way investors heard it is he will respect all the debt that’s already issued even though he may reserve the right to change the location of the airport itself,” said Alejandro Silva, a money manager for Chicago-based Silva Capital Management who doesn’t own the debt. “They were trading so cheap after they’d been under all this scrutiny about what could happen to them if AMLO were to win. Addressing that gave them comfort.”
The Mexico City Airport Trust’s longest-dated bonds have gained 4.6 percent since the IPO to about 92 cents on the dollar, bringing the yield on the investment-grade securities to 6.09 percent. An index of green bonds, which are issued to fund projects that benefit the environment, gained 0.2 percent in the same period.
Bloomberg’s poll tracker shows Lopez Obrador with 44 percent support, compared with 30 percent for runner-up Ricardo Anaya. The vote for a six-year term is July 1.