The Mexican Government's hopes of selling its stake in Cintra, the holding company for Aeromexico and Mexicana, are snagged in a $62 billion bank bailout dispute that has become a hot political issue. The dispute centres on whether the government should own Cintra shares.
When the government became a Cintra shareholder, it bailed out Mexican banks which owned Cintra shares and took over their bad debts. It also acquired assets securing them. Fobaproa, the official bank savings protection fund, became Cintra's largest single owner, with a 43.7% share. Other government agencies own another 16.3%.
Now the debate is over who should pick up the tab on bad bank debts - the banks or the government. Whatever company owns the debt would also own the shares, creating uncertainty over the ownership of Mexican companies, including Cintra.
Things came to a head when president Ernesto Zedillo proposed to pass the bailout cost to taxpayers. Members of his own party broke ranks and joined opposition calls for Fobaproa to return bad debts to the banks. Carlos Medina Plascencia, opposition leader in the lower house, is also proposing that Fobaproa return the debts to the banks for further collection efforts. He says the banks should be required to convert the debts into special 10-year bonds and then try to collect them and apply whatever they recover to the bonds.
Under Medina's plan, the banks would bear most risk of non-collection. After 10 years the government would pay a minimum guarantee on any uncollected debts and again become a minority shareholder. Meanwhile, government ownership of Cintra's shares would be in limbo.
Source: Airline Business
