The MIDAS touch – How to take a Company to the Capital Marketsgph
Mexico is not particularly known for its intensive use of its Stock Exchange; generally, this is looked as taboo by a big number of companies. This situation is stemmed by the perception of complexity and staunch regulations concerning the transactions., which creates a sense of a high entry barrier to have Access to the benefits of financing and investment that the Bolsa Mexicana de Valores (“BMV”) offers to its participants.
Furthermore, the family business model is not that attractive to private investors or several financial institutions. To offer greater certainty to concerning their activities, these types of companies are asked to offer higher transparency in their operations, which is not always achieved; allowing the families to keep control of the Company is not always a risk that investors are willing to take. Due to this, and with the purpose of creating a larger and more Dynamic market, Nacional Financiera S.N.C. (“NAFIN”), created a program which goal is to institutionalize these companies, thus incorporating new players to the market.
The Alternative Corporate Debt Institutional Market – Mercado Institucional de Deuda Alternativa Societaria (“Midas”) in Spanish – tries to define and guide the structuring and financing of projects that contribute to environmental sustainability, focuses in creating employment, generates value chains where they are established and those that require high investments on the long term.
How does it work? The first step is to identify the type and size of the company. This program focuses in industrial, commercial and service companies (except those in the financial area), medium or large, that are seeking to change their family company structure to something more institutional.
Once the project is identified, NAFIN, in some cases in participation with other financial institutions, grants financing to these companies with the purpose of redefining its corporate structure, thus establishing certain limits, also acquiring resources to buy assets that will help in the growth of the company and refinance their debt.
The endgame of the MIDAS program is to establish corporate governance policies and improve the financial situation of the Company, so that in a term of 5 years, it would be in the position of issuing debt or equity certificates, through the BMV, thus finding new ways to finance their operations and/or new projects.
In a broad sense, we can see that some of the incentives that this program offers are decreasing the interest rates of the financing, and providing counsel during the institutionalization process.
At Gloria Ponce de León y Hernández, we strive for our clients to have Access to these types of programs through the review and restructure of their corporate schemes, in such a way that they Will become in safer and attractive investment objectives, or, in some cases, have access to alternative financing options, such as the MIDAS program, thus the companies will have the resources to be more successful.
In the same way, our Firm is capable of acting as a bridge between the client’s Project and those willing to invest in it, or the financial institution, providing legal certainty y surpassing the expected results of the involved parties, being results and trust, two of our three core values.