By Amy Guthrie
MEXICO CITY -(Dow Jones)- Mexican private-sector banks have reached an agreement to refinance 34 billion pesos ($2.45 billion) in debt owed by the northern state of Coahuila, which revealed in August that its debt obligations had ballooned well-beyond market assumptions.
Grupo Financiero Banorte SAB (GBOOY, GFNORTE.MX), one of Coahuila’s creditors, issued a press release late Friday celebrating the deal as a step toward greater austerity and transparency on the part of Coahuila.
Coahuila surprised markets when it admitted in August that it owed MXN34 billion, four times more than the debt level it had previously divulged. About a third of that debt was due for payment in the near term.
Also in August, Deputy Finance Minister Gerardo Rodriguez alerted market participants that local governments had MXN50 billion in off-the-books debt that is not guaranteed by tax collections, and that about half of that debt belonged to Coahuila.
The statement issued Friday offered slim details on the new loan terms, apart from saying that Coahuila is expected to pay the credit back in 20 years and that it will also be charged refinancing costs.
The lenders have created a trust through which the payments will be issued, while also linking payments to a share of Coahuila’s tax receipts from the federal government.
The refinancing deal implies a commitment to “discipline, transparency and accountability” on Coahuila’s part, while also laying out ways the state can increase income and lower expenses, the statement said.
BBVA Bancomer, a unit of Spain’s Banco Bilbao Vizcaya Argentaria SA (BBVA, BBVA.MC) and Mexican financial group Multiva also participated in the refinancing pact.