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Mexico City Airport
Why buy this bond?
The debt is senior insured and FIRST LIEN, i.e. the highest category.
Bonds are liquid and can be converted into cash at any time.
When reinvesting the coupons, the return is 8.87% pa against the original investment.
The bonds are so-called green bonds, which means that within the EU no 15% tax is paid on the proceeds!
Ask without obligation
Mexico City Airport
The Mexico City Airport Trust is a company owned by the State of Mexico. He decided to build a new airport in the capital (22 million inhabitants).
The old airport is no longer up to speed and therefore a new one needs to be built.
These bonds have a BBB rating from the S&P agency , i.e. in the safest zone.
In addition, they are secured an exclusive concession to operate the airport in the capital until 2048 with an option until 2098.
Is Mexico a good country for investment?
The United Mexican States is a federal presidential republic with a constitution of 1917.
All adult citizens over the age of 18 have the right to vote.
The President is both the Prime Minister and the Commander-in-Chief of the Armed Forces (similar to the US).
Legislative power is exercised by a bicameral parliament consisting of the Chamber of Deputies and the Senate.
Important information
Unemployment in Mexico in 2021 is 4.2%.
Before the pandemic, it was 3.5%.
Mexico has an investment grade rating BBB, so very high quality.
Trade agreement with the USA - transfer of production from China.
Mexico has a smaller debt-to-GDP ratio than Germany (Mexico 60% debt-to-GDP ratio and Germany 69%).
Mexico is the 16th largest economy and could become the world's fifth largest economy by 2050, according to World Bank estimates.
Complete information
Issuer
Grupo Aeroportuario de la Ciudad de Mexico SA de CV
The name of the issue
Grupo Aeroportuario de la Ciudad de Mexico SA de CV, 5.5% 31Jul2047
Currency
US dollar $
Emission volume
3,000,000,000 USD
The face value of the bond
$1000
Indicative market price
687 USD
Discount
313 USD
Coupon from face value
5.5% p.a
Coupon payout frequency
semi-annual salary
Due date
31.7.2047
100% liquidity
Yes
Preferred holding scenario
18 months with a target price of $1550
Yield to Maturity
8.73% pa - before taking into account all costs
Preferred scenario
52.56% pa - before taking into account all costs
Rating
BB (S&P)
Hierarchy of debt
Senior Secured & First Lien
When reinvesting the coupons, the return is 8.87% pa against the original investment.
Preferred scenario + 53% appreciation and annual 5.5% coupon.
The bonds are so-called green bonds, which means that within the EU no 15% tax is paid on the proceeds!
You can find the prospectus for the bonds here:
5.500% Senior Secured Notes due 2047 - Prospectus
Non-defaultable annuity
"alternative to investment in rental housing"
Bonds we perceive them as non-defaultable , similar to, for example, the bonds of the Boeing company. The bonds are liquid and can be converted into cash at any time . There is no need to hold them to maturity.
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Why Mexico City Airport bonds will appreciate 50% in 9-24 months?
Default situation
For bonds in the investment zone (rating from BBB- to AAA), default is extremely unlikely, which is also confirmed by historical statistics. For these companies, it is practically impossible to become insolvent in the next 10 years.
Thanks to the fact that the bonds are liquid, we can sell them at any time - there is no need to wait until maturity.
Benchmarks with investment grade bonds, unaffected by Covid
Apple Inc. – bonds due 2051 are trading at $996.4 (approx. 99.64% of face value) and yield a coupon of 2.65%.
The yield to maturity is therefore 2.65% pa
Visa Inc. – the company's bonds due 2050 are trading at $899.7 (or 89.97% of par) with a coupon of just 2%.
The bonds thus bear a total of 2.48% pa until maturity
Bonds hit by Covid but partially recovered
The Boeing Company - The company 's bonds traded at $1,000 (100% of par) a year ago with a 5.85% coupon.
Since then, they have strengthened by 36.29% and paid a coupon of 5.85%, i.e. a total of 42.14%.
Currently, bonds for a new buyer bear a yield to maturity of 3.71% pa thanks to a high coupon, i.e. significantly more than Apple or Visa bonds.
These bonds have the potential for further appreciation to $1,620 (162% of face value), at which point they will carry to maturity the same as Apple's bonds.
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Thus, the investor was able to conclude a loan agreement (buy a bond) with Boeing a year ago, in which he gets paid 5.8% pa for the next 30 years for the capital provided.
There is interest in this credit contract now because the return to risk is unprecedented and the market can sell this contract for $1360 (versus a $1000 investment a year ago).
Mexico City Airport Trust - Secured Monopoly Bonds
In the case of MCA, the same situation will play out. The bonds are even rated a notch better than Boeing bonds, however they trade at 10 USD (101.5% of face value) at a coupon of 5.5%.
The bonds are so-called Green bonds , which means that, under European law , the proceeds are not taxed .
The coupon thus corresponds to the standard 6.45%. We expect the bonds to compare to Apple's bond yield . This would boost them to $1550 (155% of par) + 53% and a 5.5% net coupon each year.
Risk
The bonds are secured by an exclusive concession to operate the airport in Mexico City until 2048, with an option to extend until 2098, and property to be acquired and developed with the money raised from the bonds.
The company belongs to the State of Mexico (BBB rating, debt to GDP 61% vs. Germany 69%).
22 million people live in the capital and the surrounding agglomeration, it is the second largest city in the Western Hemisphere - this is related to the rapid development of the airport in terms of the number of passengers.
The airport has a monopoly position – there is practically no risk of competition.
Bondholders
Among the holders of these bonds are many large banks and pension funds.
Progress scenarios
1.
The bonds will appreciate to $1,550 (155% of face value) + 53% and a 5.5% net coupon each year.
2.
The bonds will not strengthen and will pay holders an "rent" in the form of a coupon every year - for an investment of USD 2.5 million, this is an annual rent of USD 135,467.98 (CZK 2,953,202 at the assumed exchange rate of USD 21.8/CZK).
3.
Insolvency - although we consider this scenario extremely unlikely, it is a serious one to mention. The bonds are secured by an exclusive concession to operate the airport until 2048, with an option to extend until 2098. Such a concession has a higher value in the market world than the total debt issued, while the funds will be spent practically exclusively on the construction of the airport.
Overall summary
Mexico City Airport bonds are an absolutely exceptional investment in terms of risk and return.
Especially if the expected scenario is fulfilled and the bond grows to USD 1550 (+ 53%). However, even in the case of a carefree annuity , this investment stands out above the others with its parameters .
By reinvesting the coupons , it is then possible to reach even more interesting numbers