Mexico Sweetens Offer for Investors in Scrapped $13 Billion Airport Project

(Bloomberg) -- After investors rejected a previous offer, Mexico is sweetening the pot to placate holders of bonds in a $13 billion airport project that’s being axed by the nation’s new president.

The improved bond buyback offer, which is still capped at $1.8 billion, includes a purchase fixed at par, plus interest, Mexico’s Finance Ministry said in a statement. The previous tender had offered a reverse Dutch auction to determine the price starting as low as 90 cents on the dollar.

The offer would increase consent payments to $10 per $1,000 principal, add new default triggers, and protect bondholders from lower rates of passenger charges at the current Mexico City airport, among other changes. The deal’s deadline will also be extended.

The ministry is seeking to attract investors to the negotiating table, or risk being forced to immediately pay all $6 billion in bonds should the notes default due to President Andres Manuel Lopez Obrador’s decision to cancel the airport. AMLO, as the new president of Mexico is known, has pledged to dismantle the project that’s already mid-construction, claiming the price tag is bloated by corruption and citing results of a public referendum his political party organized.

“The Ministry of Finance and Public Credit believes that these changes are in the best interests of holders, and that they address the concerns raised by holders to the fullest extent possible,” according to a press statement.

A group of creditors rejected the original offer the government proposed last week, raising concerns that it would strip them of some of their rights. They balked at stipulations that holders must consent to allowing the project to be canceled and that revenue streams for the bonds would be diverted to the existing Mexico City airport. It’s now up to bondholders to decide whether to accept the new terms.

Airport bonds are trading at around 86 cents to the dollar.

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