Bonds for never-built Mexico airport bring investors 50% gains

To money managers, bonds tied to a failed airport project in Mexico increasingly look like a sure thing. The Mexico City Airport Trust bonds raised money starting in 2016 to build a new airport serving the nation’s capital, a project that President Andres Manuel Lopez Obrador canceled in 2018. But the securities are backed by passenger fees from the existing Benito Juarez International Airport. Those fees have been rising as international air travel rebounds, helping the so-called Mexcat 30-year bonds surge by around 50% since late September. That makes them the best-performing Mexican corporate notes over that period, accounting for both price changes and interest payments. The spread on the bonds due 2047 relative to comparable dollar-denominated Mexican government debt has narrowed to its lowest since issuance. The bonds have jumped further over the past month, after AMLO said he wants the navy to take over operation of the airport. The comment has made investors hopeful that Mexico will start to buy back some of the $4.2b total of bonds tied to the project, or offer a full guarantee to replace the payments based on passenger fees, said Aaron Gifford, an emerging-market sovereign debt analyst at T. Rowe Price in Baltimore. A guarantee could be riskier for the government, since it could lead to holdouts, while an early repurchase would be more promising, he said. <br/>