Category: Corporate & Sovereign Strategy

Argentina’s Transportadora de Gas del Norte (TGN) has pushed out the deadline for investors to participate in a debt restructuring offer to August 25, it says, from a previous deadline of today. The gas distributor is still negotiating with creditors, including a block holding more than 55% of the outstanding debt. TGN had offered investors the option to exchange some $347m in 2012 bonds for new 2021 notes paying 2%-6%, or receive cash at a 75% discount to face value. TGN defaulted on a $22m debt payment in December, leading the government to intervene in the company.

Desarrolladora Metropolitana (Desmet) has hired Heritage Capital to advise on a restructuring of a $200m issue of 2017 10.875% bonds. The Mexican homebuilder missed its May coupon payment on the non-call 5 notes, issued in 2007 via Dresdner and was downgraded to Ca by Moody’s. The deal was recently quoted at 2 cents on the dollar by Credit Suisse. Heritage executives, some of whom worked at Dresdner at the time of the issuance, are familiar with the company, and are heard to have replaced Goldman Sachs as financial adviser on the restructuring, which is still in early stages. Bondholders are also heard to be forming an ad hoc committee to discuss a solution as a unit. Desmet has developed a reputation for lack of transparency with the markets, and strategists say the company has not provided updated financials in more than a year. Desmet is heard to have engaged Dewey & LeBoeuf and Guerra y Gonzalez for legal advice.

Mexican glassmaker Vitro says it expects to propose a debt restructuring plan next week. In a filing detailing Q2 numbers, the company’s chief restructuring officer Claudio del Valle says, “We continue conversations with our derivative counterparties and bondholders with the objective of achieving an organized debt restructuring and are now in the process of finalizing a restructuring proposal which we expect to submit to our creditors the first week of August.” Vitro bonds were yesterday quoted by BCP Securities as trading in the high 30s. That implies that the market is expecting the ultimate value of the notes to be in the low to mid 50s, says Jim Harper, analyst at BCP. He notes the market likely expects a restructuring to take at least 6 months, and like any other workout, involve a number of risks, which merit the 15 or so point discount from expected ultimate value. Vitro’s Q2 results include a 36% drop in consolidated sales and 91% decline in Ebitda from its flat glass division, which only serve to reaffirm the company’s weak ability to service debt. Earlier this year, bondholders organized under CarVal and ING. Vitro hired Rothschild in May to replace its original advisor Blackstone.

Mexican tortilla maker Gruma appears to be close to finalizing a complicated restructuring of its debt and derivative liabilities. It says in a filing that it has signed preliminary agreements to amend terms on a MXP3.37bn loan it received from Bancomext in 2008 and to refinance a $197m 5-year loan it raised with BBVA in 2005. The Bancomext facility, originally due 2010, has been extended until 2019 with a 3-year grace period, while the BBVA facility, also due next year, has been pushed back until 2014, according to a Gruma official. The company says it obtained a 2-day extension on its deadline to finalize the restructuring of $726m in derivative liabilities, most recently scheduled to be wrapped up July 22. It now has until tomorrow, July 24, to finish the talks, but Gruma says it already expects to have to request an additional extension beyond that to wrap up final documentation. Goldman Sachs is advising Gruma.

The default rate for LatAm corporates covered by Fitch is seen jumping to approximately 9.0% this year, versus 3.2% during 2008, with a worst case scenario being 13%. The agency finds that liquidity and cashflow positions have deteriorated dramatically among lower speculative-grade rated LatAm corporate issuers amid the severe global economic slowdown. Its review covers 42 issuers across LatAm with an issuer default rating of B+ or below. Some 40% of that universe generates less Ebitda than short-term debt, up from 3% last year, says Joe Bormann, Fitch MD for basic industries in the LatAm team. Some 60% of the companies have less cash than short-term debt, a threefold increase from 2008. “The deterioration of liquidity has been significant during the past year,” says Bormann. “The sharp contraction of demand from Europe and the United States has hit exporters especially hard,” he adds. Among the 42 issuers, 19 have liquidity positions that have been classified as either below average or poor. This is a sharp increase from July 2008, when only 6 of 31 companies covered in a similar review were deemed to be in a similar situation. Of those 6 companies, 3 defaulted during the second half of 2008. Fitch categorizes the cashflow trend of 26 of the 42 companies in its report to be either below average or poor. During 2008, 8 companies out of 31 shared this designation and four of them have now defaulted on their financial obligations.