Argentina’s TGN, which defaulted on a $22.1m dollar payment on bonds in December, has hired Barclays Capital to advise it on a debt restructuring, according to an investor away from the deal. The company’s executives, including, CFO Claudio Hirschler, are expected in New York next week to meet with creditors. The company plans to initiate a debt restructuring process for all of its approximately $345m in outstanding debt. Fitch downgraded the issuer to D from C in January following the company’s December 24 announcement, marking the first Argentine corporate default in several years. A weaker peso and shuttered bond and loan markets, in particular for Argentine borrowers, are hitting local companies hard, say local bankers. More restructuring and potentially fresh defaults are on the way, say analysts. As of September, TGN’s total debt included $141m in amortizing notes at 6.5% step-up due in 2012, and $204m bullet notes at 7.5% step-up due in 2012, says Fitch.
Category: Corporate & Sovereign Strategy
Comerci Hires Help for Creditor Talks
Mexico’s Comerci has hired Rothschild to work with the bankrupt company’s creditors. Comerci has been trying to restructure debt since it filed for bankruptcy last year following a derivatives-induced cash squeeze that left the company with no resources to meet debt obligations. Credit Suisse has been advising the retailer on asset disposals and liability management.
Cemex Cements Loan Restructuring
Cemex has succeeded in extending tenors and amending terms on some $4bn in loans after around 3 months of talks with lenders. Last year the company was forced to address a sizable hump of short term maturities, many of which were from a $6bn Rinker acquisition facility raised in December 2006. Cemex says it extended the tenor on $1.7bn worth the part of the Rinker loan that matures in December 2009. It was targeting $1.5bn-$2.0bn in extensions for this facility. It also pushed out the maturities of a handful of 2009 and 2010 bilateral loans until February 2011. Cemex was targeting up to $2.7bn for this portion of its debt. As part of the restructuring, the company also adjusted covenants to permit a rise in leverage to 4.75x by June 2009, followed by a drop to around 3.5x by September 2011. In Q1 2008, Cemex net debt to Ebitda jumped to 3.7x from 1.2x a year prior, which coincided with a downturn in the company’s revenues as the real estate and construction sectors softened. In 2006, it paid $14bn for Rinker. BBVA, Citi, HSBC, RBS and Santander led the discussions. The result of the restructuring falls within the company’s stated targeted range, though the volume of refinanced debt falls below its maximum targeted. Some banks were heard choosing to not participate in the voluntary restructuring, preferring timely paydown over extending tenor. Others deliberated with committees for longer than expected, which added to delays in the process, which Cemex was hoping to have wrapped up by year-end 2008. Having completed the refinancing, Cemex has gained some breathing room to proceed with its deleveraging process, which includes selling assets around the world.
Medina-Mora Steady in Citi Shuffle
Manuel Medina-Mora keeps his role as LatAm head and former regional DCM head Mike Corbat moves up as part of a Citi reorganization announced Tuesday by CEO Vikram Pandit. Citi was split into two parts in a bid to salvage the strongest elements of the franchise. Citicorp includes assets that the bank wants to keep. This includes LatAm, Asia, EMEA and North America, as well as global transaction services, the corporate and investment bank and the private bank. Citi Holdings – what analysts are calling “the bad bank” – includes brokerage and asset management, local consumer finance, and the special asset pool, all units that Citi is looking to divest. It will be run on an interim basis by Corbat. The former global head of commercial and corporate banking worked his way up from head of LatAm DCM at the start of the decade, through leadership of Citi’s EM platform. Citi says it is not looking to sell any part of the LatAm franchise, least of all its lucrative Banamex unit. However, bankers at other shops say Mexican financiers are mulling a bid, and that Citi would be forced to sell if its financial situation deteriorates, or if it is bought by the US government. Citicorp has 6% of its assets and 9% of its average loans in LatAm. The Citi reorg unveiled this week is an attempt to stop the rot and return the beleaguered shop to profitability. The bank’s stock jumped on news of the global revamp and closed 6.6% higher at $3.55 Tuesday. (For an exclusive interview with Manuel Medina-Mora, including comment on the future of Citi-Banamex, see www.latinfinance.com)
Vitro Seen Headed for Default
Moody’s has cut Vitro’s senior unsecured debt and corporate family ratings to Ca (negative) from Caa1 amid fears that it may not be able to meet near term financial obligations. This includes a $45m coupon payment February 1 on 2012 and 2017 notes and an estimated $20m in long term debt maturities during Q1. “The company also has a contractual commitment to pay about $29m in remaining 10 monthly installments during 2009, related to the put option exercised by its Spanish joint venture partner in 2008,” says Moody’s. As of September 30, Vitro had $72m in unrestricted cash reserves, covering short term debt 0.46x, it adds. The Ca rating reflects the expectation of modest recovery for the senior unsecured debt class in the case of default. The negative outlook reflects the risk that ultimate recovery level may be lower, says Moody’s. Vitro is Mexico’s leading glass manufacturer with revenues of $2.75bn for the 12 months ended September 30. S&P and Fitch have also cut the credit over the last week. In the event of default Fitch expects recovery of 31%-50% on a total $1.225bn in bonds due 2012, 2013 and 2017.
Telecom Italia Should Buy Out TIM: CVM
Brazil’s securities commission, CVM, has notified TIM Participacoes that Telco, which owns 24.5% of Telecom Italia, “has the legal duty” to launch a public tender offer for the shares it does not own in TIM, based on the stock purchase agreement. CVM’s notice places no direct obligation on Telecom Italia, the Italian company says. Telecom Italia owns almost 80% of TIM. According to Reuters, the move could cost shareholders more than $1bn. Telco, which has the right to appeal, considers the ruling “ungrounded,” it says in a statement cited by Reuters.
BofA-Merrill Shakeup Dents LatAm
Amid turnover in the global C-suite – including the exit of former CEO John Thain – senior LatAm staff are departing Merrill Lynch, which reported a Q4 loss of $15.31bn. Bankers at other shops expect further regional reductions as Bank of America pushes to cut costs and realize value from the Merrill purchase. Two senior LatAm equities bankers have recently left as part of a company-wide reduction in headcount. The departures are billed by some as resignations, though Merrill is rumored to be seeking to cut thousands of jobs globally. Juan Vogeler, MD and co-head of LatAm ECM based in New York, has gone. Ricardo Lanfranchi, MD in charge of Merrill’s Brazil-based equities brokerage unit, has also departed, along with at least 6 other mid and junior level investment bankers in Sao Paulo. The changes appear to leave Sebastien Chatel, co-head of ECM based in Sao Paulo, as the sole remaining senior executive overseeing the equity product for LatAm. The MD was confirmed last week to still be employed at Merrill. Three more rounds of layoffs are expected at BofA-Merrill globally, the next in February. “It’s in total disarray, all over the place,” says a LatAm banker at the recently merged entity, when asked about the mood internally. A Merrill spokeswoman declines to comment. Merrill has made a decent 2009 start on the fixed income side in LatAm, with a joint bookrunner title on Brazil’s comeback $1bn 2019 earlier this month. However, the bond traded poorly and was criticized by investors and bankers at rival shops for its execution. The shop also advised on Invest Tur’s merger with LAHotels.
Vitro Suffers More Ratings Pain
S&P has cut Vitro’s ratings to CC from B minus keeps the outlook negative amid growing fears of default. The agency expects Q4 results to show liquidity and financial performance still under pressure. It also expects Vitro to remain affected by a weak economy in Mexico, the US and Spain, Vitro’s principal markets. S&P analyst Marcela Duenas also thinks it’s likely the company will not be able to pay a $45m February coupon and other near-term debt obligations and that it will need to generate more cashflow for its acquisition of Spain’s Cristal, valued at EUR31m.
Santander Said Maintaining Brazil Investments
Banco Santander’s CEO Emilio Botin says his bank will proceed with plans to invest little over $1bn through 2011 to expand in Brazil, according to wire reports that cite a company statement. The announcement comes a few days after Santander slashed 400 jobs in the country, according to media reports. Bank officials were not immediately available for comment.
Apex Silver Files for Bankruptcy, Sells Mine
Apex Silver Mines, which owns 65% of the San Cristobal project in Bolivia, has filed for bankruptcy under Chapter 11. As part of the process, it has agreed to sell its interest in San Cristobal to joint venture partner Sumitomo for $27.5m in cash. If Apex opts to sell to another buyer, it will have to pay a break-up fee of $16m. It would also have to pay up to $2.0m to reimburse Sumitomo’s expenses. Apex also entered into a plan to support agreement with Sumitomo and 11 lenders under the San Cristobal project finance facility and with holders of the company’s 2.875% and 4.000% convertible senior subordinated notes due 2024 where the parties agree to vote in favor of a joint plan of reorganization. If the converts holders accept the plan, senior lenders will waive and release their senior claims and noteholders will receive a pro rata share of approximately $45m in cash plus common stock in the reorganized company. However, if the noteholders reject the proposed plan, they would receive an allocation of cash only after payment in full under the project financing facility of Sumitomo and the senior lenders.