U.S. Bankers Cold to Swaps For Mexico Interbank Debt
NEW YORK -- U.S. bankers are showing little interest in Mexico's proposal to swap bonds for their interbank claims against the country's state-owned banks.
Bankers said they see no reason to exchange their interbank credits as long as Mexican banks continue to make good on their interest payments.
"A lot of people are taking the view that their interbank claims are worth 100 cents on the dollar, so why should they exchange them at a discount?" said one banker.
Reductions Are Sought
Mexico is keen on reducing foreign banks' claims on state-owned Mexican banks in order to make them more attractive to private investors.
In a letter to banks last week, Mexico offered to exchange up to $1 billion in foreign interbank loans to Mexican banks for government bonds.
The offer calls for banks to tender their interbank credits to Mexican banks at a discount by July 3. Interbank credits to Mexico currently trade at a 85 cents to 93 cents on the dollar.
Banks that offer the steepest discounts will get 10-year government bonds with a floating rate fixed at 13/16 over the three-month London interbank offered rate.
Stakes in Banks Available
Foreign banks will be able to exchange the bonds for equity stakes in Mexican banks that are being privatized.
Foreign banks have been rolling over about $4.5 billion in short-term lendings to Mexican banks since Mexico failed to meet its payments to foreign banks in 1982.
That amount includes $1.5 billion owed to U.S. banks, mostly large money-centers such as Citicorp, Chase Manhattan Corp., and Manufacturers Hanover Trust Corp.
Citicorp, one of the largest creditors, is owed some $300 million by Mexican banks.
Interbank borrowings represent about 15% of the some $29 billion Mexico owes foreign commercial banks.
The country has been steadily cutting cut its foreign debts through buybacks and debt restructurings as part of an effort reduce debt servicing and improve investments.
Mexican officials said this week that Mexico's foreign commercial bank debt fell by $15 billion last year and has been cut by 50% since 1985. [Tabular Data Omitted]