Category: Mexico

Liquidity for Mexican transport firm Grupo Senda is tight, but should be manageable, according to Fitch, which affirms its B+ rating and keeps a stable outlook. “Grupo Senda’s ratings reflect the company’s relatively high financial leverage and its solid competitive position as a leading provider of intercity bus passenger services in Mexico,” says the agency. It adds that Senda is vulnerable to devaluation in the MXP, since it generates roughly 90% of revenues in local currency and has most of its debt denominated in USD. The company had MXP142m of cash and marketable securities and MXP419m of short-term debt as of June 30, says Fitch. It also has access to committed credit lines in excess of MXP100m. Senda’s $150m 10.5% of 2015 was bid Friday at 50, down 10 points since October 17, according to Credit Suisse.

S&P has affirmed its BBB+ (stable) Mexico rating, despite the buffeting it is getting from global financial meltdown. “Volatility in international financial markets and the downturn in US and global economic activity will not undermine Mexico’s commitment to macroeconomic stability nor weaken its creditworthiness,” says S&P credit analyst Lisa Schineller. However, the agency notes that the combination of a sharp slowdown in real GDP growth in 2009 along with lower oil revenues will pressure the budget, and adds that Mexico has limited room for countercyclical fiscal policy. S&P expects the government to permit sufficient capital investment by Pemex to maintain oil production near current levels. “Mexico has a track record of adjusting to adverse fiscal developments, and recent improved cooperation across parties to advance pieces of legislation suggests that such proactivity will continue,” says S&P. Mexico’s rating trajectory will depend on the ability of the Calderon administration to manage upcoming fiscal strains and contain the increase in the public-sector borrowing requirements while allowing for significant levels of investment by Pemex over the next several years, it adds. “Lower growth and government oil revenues, combined with congressional elections in mid-2009, could generate political pressure to shift away from the fiscal and monetary policies that have underpinned Mexico’s improved sovereign creditworthiness,” S&P warns. However, the agency expects the government to act prudently by compensating for declining oil revenues and, consequently, support Mexico’s debt and fiscal dynamics.

The Mexican government plans to introduce several measures to prop up local markets, including reducing sales of long-term MXP bonds while boosting shorter-dated auctions, and borrowing more from multilaterals. To “mitigate liquidity problems” in the local financial markets, Mexico, as of November 4, will cut sales of 10, 20 and 30-year peso denominated bonds in the fourth quarter while increasing sales of 1, 3, 6 and 12-month bills. It also plans to borrow as much as $5bn additional from multilateral banks through 2009. Government bank savings protection agency IPAB will cut the amount of debt it issues in Q4, and the central bank will start next week a program to buy back up to MXN150bn in IPAB bonds. Finally, the central bank will also establish by November 14 an interest rate swaps program for up to MXN50bn, under which market participants can swap exposure to long-term fixed rates for floating short-term rates. Separately, pension regulator Consar has proposed allowing pension funds, locally known as Afores, greater flexibility to exceed value-at-risk limits under special circumstances.

Mexican Glassmaker Vitro is edging closer to becoming the next Mexican distressed story, following the decline of CCM and paper producer Durango. As its 8.625% 2012 and 9.125% 2017 bonds trade at the 25-26 level, according to Credit Suisse, Moody’s and Fitch have placed their B2/B ratings on review for downgrade, and JPMorgan says it expects Vitro to seek protection. “We see the company more than likely seeking protection from creditors under the Mexican Reorganization Act,” JPMorgan says, seeing a recovery rate between 20%-30% on the company’s 2012, 2013, and 2017 bonds. The shop does, however, move its rating to marketweight from underweight, based on current market prices relative to base case recovery estimates. “The rating actions reflect increased pressure on Vitro’s liquidity and financial flexibility following the company’s recent announcement of a $227m marked-to-market loss on its derivative instruments,” Fitch says of its ratings move, adding that unwinding the positions should increase leverage. The action also reflects the current volatility in the financial and credit markets, as well as a more challenging operating environment due to lower economic growth prospects in Mexico and other regions where Vitro has a presence. It was facing $123m in amortizations this year as of mid-year, with $28m due in 2009. Vitro said this week that it continues to negotiate with creditors, and has announced expenditure reductions in an effort to maintain liquidity. It may provide more information about the negotiations when announcing earnings on Tuesday.

The state of Mexico has signed a MXP500m 15-year loan with Banorte. The loan is a direct obligation of the state payable through the trust to which the state of Mexico has pledged the rights to 100% of its federal participation revenues and to 25% of its revenues a government fund to support state governments. Moody’s rates the facility Baa3. Banorte declines to disclose the spread over TIIE.

Moody’s has lowered the outlook on Maxcom’s B3 rating to stable from positive. The move was prompted by the likelihood of a weakening of the Mexican telecom’s business and revenue growth through 2009, explains the agency. That would extend the period in which the company could reverse its negative free cash flow generation. While Mexico’s large unmet demand for telecom services helps Maxcom’s prospects, lower purchasing power in its target markets and weaker economic conditions contribute to a slower growth outlook.

Scotiabank’s Mexican unit has priced MXP4.29bn in 2012 bonds backed by loans to a road package belonging to the Fonadin infrastructure fund, at a fixed rate of 8.35%. The AAA rated notes feature a guarantee from the Mexican government and were placed with a broad group of institutional investors, according to bankers on the deal. The loans were made to a package of four roads – Cuernavaca-Acapulco, Cordoba-Veracruz, Leon-Aguascalientes and La Tinaja-Acayucan – held by the Fonadin trust (previously known as Farac) in the late 1990s. Scotia’s capital markets unit managed the sale.

Mexico’s Vitro says it is still in discussions with creditors to consider options for meeting its debt obligations during a volatile period in capital markets. Last week, the glassmaker said its derivative contracts had a negative position of $227m, including $33m in FX and interest rate derivatives. As of Q2, Vitro was facing $123m in amortizations this year, with $28m due in 2009. Its outstanding debt is about $11.35bn.

Nafinsa and Bancomext have launched a program through which they will provide MXP50bn in partial guarantees to Mexican companies needing to roll over short-term debt. The two development banks will guarantee up to 50% of the amount of new debt issued. Businesses and non-bank financial companies will be able to have the guarantees on up to 180-day paper issued through the end of 2008. The program was initially slated to launch November 1, but it was moved forward, as more Mexican borrowers have struggled recently to sell short-term debt at auction. Mexican companies have to roll over some MXP32bn in short-term debt by the end of the year. Nafinsa and Bancomext are also making available MXP35bn in credit facilities to small and medium-sized enterprises.

Grupo Aeroportuario el Sureste (ASUR) has purchased 130 hectares of land in Huatulco from Fonatur, Mexico’s national tourism fund, as part of a bidding process. The deal is worth MXP286.3m and requires that ASUR build 1,300 hotel rooms on the property within four years. ASUR, which trades on the NYSE and the Mexican Stock Exchange, has a market cap of $1.2bn.