Mexican State Coahuila Asks For More Money After Last-Minute Fix
October 03 2011 - 7:08PM
Dow Jones News
The governor-elect of the northern Mexico state of Coahuila on
Monday requested an additional 16 billion pesos ($1.14 billion) in
federal funding for 2012, just days after the state renegotiated an
unwieldy debt load with private sector banks.
Ruben Moreira told members of the budget and public account
committee of Mexico's Congress that the funds would be used to
fight poverty and build highways.
Coahuila renegotiated MXN34 billion in debt last week, extending
the payment deadline out to 20 years in exchange for promises to
share some of the state's future federal tax revenue with the
banks.
Moreira said the state contracted those bank loans to build
highways and hospitals, as well as to help marginalized
residents.
Questioned Monday about allegations that state officials have
mismanaged funds, Moreira said that audits are under way and that
potential wrongdoers will be prosecuted.
Coahuila surprised markets when it admitted in August that it
owed MXN34 billion, four times more than the debt level it had
previously divulged. About a third of that debt was due for payment
in the near term.
The revelation prompted both Standard & Poor's and Fitch
Ratings to slash Coahuila's local credit rating to triple-B-minus
from single-A-plus.
Also in August, Deputy Finance Minister Gerardo Rodriguez
alerted markets that local governments had MXN50 billion in
off-the-books debt that isn't guaranteed by tax collections, with
about half of that debt belonging to Coahuila.
The Finance Ministry said over the weekend that Coahuila had a
deadline of Sept. 30 to register the off-the-books debt with the
ministry.
Coahuila's creditors include large Mexican financial
institutions, such as Grupo Financiero Banorte SAB (GBOOY,
GFNORTE.MX) and BBVA Bancomer, a unit of Spain's Banco Bilbao
Vizcaya Argentaria SA (BBVA, BBVA.MC).
Moreira assured Monday that Coahuila has enough funds to pay
current and future debt loads. "Debt has served to finance the
development of Coahuila," Moreira said.
-By Amy Guthrie, Dow Jones Newswires; (5255) 5980-5177,
amy.guthrie@dowjones.com
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