Airport trust investors who put up US $1.6 billion to consider their legal options

Investors who purchased securities designed to partially fund the new Mexico City International Airport (NAIM) will meet next week to discuss their legal options in light of the incoming government’s decision to cancel the project.

A notification document issued via the Mexican Stock Exchange (BMV) said that Mexican and foreign holders of Fibra E shares will gather on November 29 to assess the situation.

President-elect López Obrador announced on October 29 that the partially-built project would be halted after 70% of people who voted in a four-day public consultation favored converting a México state air force base and upgrading the existing airport and that in Toluca over continuing the new airport.

The trust that manages the Fibra E shares is administered by the Mexico City Airport Group (GACM).

Article 8 of the BMV notification document proposes that the security holders vote to appoint an investment advisor to conduct an “analysis and diagnosis of the financial situation stemming from the possible termination of NAIM construction.”

Article 9 proposes the appointment of a legal advisor to analyze “the inherent risks and consequences” of the project’s cancellation.

It also recommends that security holders consider what legal action they might pursue against the incoming government’s decision.

As of September 30, just over 32.1 billion pesos (US $1.6 billion) had been invested in the Fibra E trust but it is not clear what those investors might lose. The initial prospectus said that in the event of a cancellation the holders would receive revenue from the existing airport.

BMV director José Oriol said that 45% of bonds in the trust are held by four pension funds — Inbursa, PensionIssste, Profutura and Banorte Siglo XXI.

The trust contract anticipates a variety of ways in which it could be terminated, but it doesn’t consider that termination could be required due to an external decision.

In other words, it didn’t foresee the possibility that the airport project could be cancelled as the result of a public vote.

In fact, referendums are not described in Mexico’s constitution and the consultation held last month was unprecedented.

After meeting with contractors earlier this month, López Obrador said the companies that have been building the airport wouldn’t take legal action over the decision to cancel the project, but judging by the proposals contained in the BMV document, the new government won’t completely avoid a legal battle on the issue.

Alfonso Romo, the future president’s chief of staff, admitted last week that confidence in the incoming government had diminished as a result of the airport consultation.

The cancellation decision was slammed by prominent private sector leaders and the catalyst for a large protest in Mexico City.

“We got the process wrong. I say that for my part,” Romo said at a meeting with Mexico City’s Jewish community.

“. . . The result [caused] a considerable loss of confidence, more than we could imagine.”

Source: Milenio (sp), Reforma (sp), Bloomberg (en)

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