Mezzanine Mexico Uno

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Project Number: 
11818-02
Expected Consideration Date by the Board: 
12/13/2016
Date Posted: 
10/27/2016
Company: 
Mezzanine Mexico Uno, S.A.P.I. de C.V. SOFOM, ENR
Financing Requested: 
Up to MXN 420,000,000
Sector: 
Financial Markets
Environmental and Social Category: 
FI-2
Location: 
Mexico
Country: 
Scope Objective: 

The objective of the project is to increase access to finance, and in particular to mezzanine products, for medium-sized Mexican companies with growth potential. To that end, Mezzanine Mexico Uno, S.A.P.I. de C.V. SOFOM, ENR (“MMU”) will provide mezzanine finance to companies that are seeking new or different financing options from those traditionally offered in the local financial market, to support medium and long-term growth opportunities and improve productivity.

Through this project the Inter-American Investment Corporation (“IIC”) will provide a senior loan (revolving credit line) to MMU for up to MXN 420 million (approximately US$23 million). The expected size of MMU is of MXN 2,100 million (approx. US$115 million), estimated to be reached through loans to be provided by the IIC, the International Finance Corporation (“IFC”) and other senior lenders. The IIC will participate in a co-financing agreement with IFC and other senior lenders to provide funding to MMU, which in turn will offer mezzanine financing to medium-sized Mexican companies. Vector Partners, S.C. will serve as  the manager of  MMU. It is expected that MMU will have a life of 8 years including a 3 year investment period, both of which will have two 1-year extension option.

The project is aligned with the IDB Country Strategy with Mexico as it seeks to increase the financing level available for medium-sized companies through the support of financing alternatives to expand their access to credit. Moreover, the project is consistent with IIC’s business plan which establishes that the IIC will selectively promote projects related with investment funds that contribute to development, for instance, by supporting funds that provide long-term financing to medium-sized companies with growth potential.

Environmental Review: 

1.      Project Description Mezzanine Mexico Uno (MMU) aims at providing direct mezzanine loans to medium-sized Mexican enterprises that are seeking adequate leverage structures to support long term growth opportunities and improve productivity. The purpose of the project is to support MMU’s efforts to increase access to finance and, in particular, to mezzanine products to medium-sized Mexican enterprises. Vector Partners, S.C. (“VP”) will serve as  the manager of MMU.  It is expected that MMU will have a life of 8 years with a 3 years investment period, both of which will have two 1-year extension option.

The Project consists of a senior A-loan (revolving line of credit) of up to MXN420 million (approximately US$23 million). MMU’S target size is of approximately MXN2.1 billion (approx. US$115 million) expected to be financed by loans granted by the IIC and other Senior Lenders. IIC will become participant together with the other Senior Lenders in a co-financing agreement to provide mezzanine financing to medium-sized Mexican companies through MMU.

2.      Environmental and Social Categorization and Rationale: This operation is classified as an FI-2 under the IIC’s Sustainability Policy. Based upon the nature of this transaction (i.e. a partnership to provide funding to a financial entity for mezzanine finance on-lending to medium sized corporates), there are likely to be minimal to moderate direct environmental, social or health and safety (ESHS) and labor impacts and risks. The likely investment sectors include food and beverage, agriculture, manufacturing, retail, and IT, among others. The average sub-loan will be of US$7 million approximately.  MMU will not be permitted to invest in Category A sub-projects.  The applicable E&S requirements include the IIC’s Exclusion List, national E&S laws and regulations and the IFC Performance Standards.

3.      Environmental and Social Risks and Impacts: Environmental and social risks may be related to occupational health and safety, supply chains, air emissions, and pesticide / chemical use in the agriculture sector. Vector Partners will be required to manage these risks through the application of an Environmental and Social Management System (ESMS).  The ESMS has been developed with the support of the IFC, and approved by Vector Partners’s Board.  The ESMS includes a grievance mechanism for external complaints related to sub-project impacts.  Vector Partners will work in tandem with IIC and IFC in the E&S analysis and documentation of the first three sub-loans prior to Vector Partners’s Investment Committee approval. 

4.      Mitigation Measures / E&S Action Plan

 

Task

Description

Completion date

Review of first three operations

  MMU will seek IIC’s early engagement in the first three sub-projects to confirm categorization, due diligence process, and TOR of selected E&S consultant, and corresponding action plan.  IIC will receive the due diligence report prior to the disbursements of the respective sub-loans. IIC will have the option to suggest changes to the report as well as in the action plans related to the report.

When and as ready

Exclusion of Cat A sub-Projects

MMU will not be permitted to invest in Category A sub-projects

Duration of loan