Milbank, Tweed, Hadley & McCloy has represented a group of major banks and investment firms as underwriters of senior notes issued by Mexican highway developer Red de Carreteras de Occidente, S.A.P.I.B. The 15-year notes, due in 2028, raised MXN $7.5 billion (US $603 million). It was the first time that RCO, one of Mexico’s leading highway infrastructure firms, had accessed financing in the international capital markets and the first time since 2006 that a Mexican toll-road operator accessed the international capital markets.
The underwriter group was comprised of Banco Bilbao Vizcaya Argentaria; Goldman Sachs; HSBC Securities; Morgan Stanley; and Santander Investment Securities. The offering, which closed on May 30, drew investors in the U.S., Latin America and Europe. RCO operates nearly 500 miles of roads connecting Guadalajara, Mexico City and other cities.
Milbank partner Carlos Albarracín led the deal team and explained that the transaction was noteworthy on several accounts. “In addition to being the first time that RCO tapped the capital markets, the offering is one of only a handful of corporate issues in the last several years denominated and payable in ‘Euroclearable’ Mexican pesos,” Mr. Albarracín said. In fact, he noted, it was the first peso-denominated, cross-border structured transaction of its kind.
He noted that the common terms and inter-creditor agreements governing RCO’s other senior debt, and the pledge of concession rights and other assets, required a complex deal structure. “The size and tenor of the offering were quite remarkable for a local currency deal, particularly for a first time issuer,” Mr. Albarracín said, adding that the documentation had to incorporate a unique covenant package, payment structure, reserve account structure and other features already in place for RCO’s existing senior secured financing facilities. “It definitely was not a plain vanilla structure for a senior secured bond and required extensive fine-tuning to combine, together with the Mexican peso payment mechanics.”
In addition to Mr. Albarracín, the underwriters were represented by Milbank associates Matt Squires, Hernando Becerra, Alejandra Garcia Garcia and Meredith Hines, Tax partner Andrew Walker, and Global Project Finance partner Jonathan Green.
“There is considerable investor interest in the Mexican peso at present and we are very pleased to have helped bring this milestone cross-border transaction to market,” Mr. Albarracín said.
