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Moody's assigns debt ratings of Baa2/Aa2.mx to three enhanced loans of the state of Chiapas

September 2, 2014



Moody's de Mexico assigned debt ratings of Baa2 (Global Scale, local currency) and Aa2.mx (Mexico National Scale) to the following three enhanced loans:

-MXN 1 billion (original face value) from BBVA-Bancomer with a maturity

of 20 years and a pledge of 2% of its participations revenue

-MXN 1.25 billion (original face value) from Santander with a maturity of

15 years and a pledge of 2.5% of its participations revenue

-MXN 2.181 billion (original face value) from Banorte with a maturity of

20 years and a pledge of 4% of its participations revenue

All the enhanced loans are payable through a master trust (Evercore as

trustee F/0161).

RATINGS RATIONALE

The Baa2/Aa2.mx debt ratings assigned to the aforementioned enhanced

loans reflect the underlying creditworthiness of the state of Chiapas

(Ba2/A2.mx, stable outlook), supported by the following legal and credit

enhancements embedded in the loans:

1. Validity of the legal authorization of the transaction, which

authorizes the trust to be used as a mechanism for debt service payment.

2. Strong trust structure based on an irrevocable notification to the

federal treasury regarding the transfer of rights and flows of

participation revenues to the trustee. In order to cancel the irrevocable

instruction, all the lenders have to agree.

3. Estimated cash flows generate high debt service coverage ratios. Under

Moody's base case scenario, cash flows are projected to provide debt

service coverage of 4.8X, 4.9X, and 5.2X for the Santander, Banorte, and

BBVA-Bancomer loans, respectively. Under a stress case scenario estimated

cash flows are projected to provide a minimum debt service coverage of

3.1X for the Santander and Banorte and loans, and 3.3X for the

BBVA-Bancomer loan.

4. Strong level of reserves within the master trust that represent 3.0x

debt service coverage under a stress case scenario and provide enough

cushion against payment delays.


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Source: EMBIN (Emerging Markets Business Information News)


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