By Amy Guthrie | Dow Jones Newswires
MEXICO CITY -(Dow Jones)- The governor-elect of the northern Mexico state of Coahuila on Monday requested an additional 16 billion pesos ($1.14 billion) in federal funding for 2012, just days after the state renegotiated an unwieldy debt load with private sector banks.
Ruben Moreira told members of the budget and public account committee of Mexico’s Congress that the funds would be used to fight poverty and build highways.
Coahuila renegotiated MXN34 billion in debt last week, extending the payment deadline out to 20 years in exchange for promises to share some of the state’s future federal tax revenue with the banks.
Moreira said the state contracted those bank loans to build highways and hospitals, as well as to help marginalized residents.
Questioned Monday about allegations that state officials have mismanaged funds, Moreira said that audits are under way and that potential wrongdoers will be prosecuted.
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.
The revelation prompted both Standard & Poor’s and Fitch Ratings to slash Coahuila’s local credit rating to triple-B-minus from single-A-plus.
Also in August, Deputy Finance Minister Gerardo Rodriguez alerted markets that local governments had MXN50 billion in off-the-books debt that isn’t guaranteed by tax collections, with about half of that debt belonging to Coahuila.
The Finance Ministry said over the weekend that Coahuila had a deadline of Sept. 30 to register the off-the-books debt with the ministry.
Coahuila’s creditors include large Mexican financial institutions, such as Grupo Financiero Banorte SAB (GBOOY, GFNORTE.MX) and BBVA Bancomer, a unit of Spain’s Banco Bilbao Vizcaya Argentaria SA (BBVA, BBVA.MC).
Moreira assured Monday that Coahuila has enough funds to pay current and future debt loads. “Debt has served to finance the development of Coahuila,” Moreira said.
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