Mexican Bank Banorte Restructures Aguascalientes State Debt
October 19 2011 - 6:06PM
Dow Jones News
Mexican bank Grupo Financiero Banorte SAB (GBOOY, GFNORTE.MX)
said Wednesday it recently restructured debt owed by a third
Mexican state, this time Aguascalientes in central Mexico, bringing
the bank's total refinancing balance for troubled states up to
13.21 billion pesos ($982 million).
The restructured debt owed by the states of Coahuila, Sonora and
Aguascalientes represented 4% of Banorte's entire loan portfolio as
of the end of September, the bank said in a statement.
Banorte previously said that it restructured MXN4.75 billion for
Sonora, while it did not disclose the amount of debt it
restructured for Coahuila.
Banorte also said Wednesday that it has adopted new methodology
for capital reserves to guard against potential losses on its loans
to Mexican states and municipalities. This new methodology resulted
in a MXN357 million decline in the bank's reserves.
The "chief objective" of refinancing the three states' debt,
Banorte said, was to help them achieve better financial terms and
credit conditions and thus obtain more flexibility in the
management of their fiscal incomes.
The bank said that it did not offer the states discounts or
write-downs as part of the refinancing deals, and that all three
entities are current on payments.
Under the refinancing agreements, the loans to Coahuila, Sonora
and Aguascalientes will now come due in 20 to 27 years, Banorte
said, with each loan carrying a payment guarantee backed by the
state's tax revenues.
As such, the bank said that 87% of its local government loan
portfolio now carries some sort of guarantee of payment from the
local entities' revenues, and that just 8% of the loans are
short-term, non-guaranteed debt.
The local-government portfolio has zero bad debt, Banorte
said.
A number of local governments in Mexico have run into tight
budget situations in recent months after having contracted
short-term bank loans without boosting their revenue streams.
Deputy Finance Minister Gerardo Rodriguez alerted market
participants in August that local governments had MXN50 billion in
off-the-books debt that isn't guaranteed by the states' share of
federal tax collections.
The Finance Ministry keeps track of local-government debt that
is tied to promises of those entities' shares of federal tax
revenue.
The local debt, however, is not guaranteed by the federal
government itself.
Banorte said Wednesday it intends to take on additional
restructurings of state and municipal debt as it seeks to maintain
its leadership position in the sector.
Deutsche Bank noted this week that Banorte aggressively has
grown its loans to Mexican government entities in the past 2 1/2
years, with local governments accounting for 17% of Banorte's loan
book at the end of June versus 11% at the end of 2008 for an 18%
market share of government loans.
Other banks that recently have restructured bank debt for
troubled states include BBVA Bancomer, a unit of Spain's Banco
Bilbao Vizcaya Argentaria SA (BBVA, BBVA.MC), and the Mexican unit
of Canada's Scotiabank (BNS, BNS.T).
-By Amy Guthrie, Dow Jones Newswires; (5255) 5980-5177;
amy.guthrie@dowjones.com
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