Category: Mexico

Mexico’s Soriana responded to a lowering of its rating to Ba1 from Baa2 by Moody’s by stating plans to make an MXP800m payment on short-term debt due Thursday. It also says that it successfully placed CP last week below the TIIE rate (8.66% Tuesday), and does not have FX-linked derivative positions. Moody’s cut Soriana amid fears about an aggressive liquidity profile caused by a shift towards CP issuance in recent months.

Mexico’s government is waiting until at least the first half of 2009 to open the bidding process on the Maya Riviera Airport. It had expected to tender the project, which could cost $200m, before the end of this year. The news follows a delay on the bidding for the Punta Colonet port project and other major bids, as the Calderon infrastructure agenda suffers due to the international liquidity crisis.

Banxico Tuesday announced that it made two auctions worth a total of $6bn, the first at an exchange rate of MXP12.86 and the other at a rate of MXP12.76 per dollar. The news comes after the bank auctioned $400m at an exchange rate of almost MXP13 per dollar a few days earlier. Mexico’s peso snapped back before closing at MXP12.44. The currency has firmed off last week’s trough of MXP14.35/USD.

Cemex – not long ago the bluest of Mexico’s industrial blue chips – is running into trouble with debt refinancing, according to S&P. The agency revised downward its ratings on Cemex’s long-term credit and senior unsecured debt to BBB minus from BBB, bringing it one notch above junk. Analyst Juan Pablo Becerra projected weaker revenues and cash flow generation in 2009 and a difficulty to further reduce debt through asset sales because of the near-freeze in the credit markets. Becerra also noted the outlook for Cemex is negative, reflecting “the risk of further deterioration in the company’s financial condition due to the weakness in the global economy.” He also said that “a downgrade is likely if Cemex fails to improve its funds from operation-to total net adjusted debt ratio to a low 20% by 2010 and if it is unable to refinance its 2009 maturities well in advance.” After recent news of a $500m mark-to-market loss at Cemex, UBS earlier this week cut the cement giant’s stock to sell from neutral. The shop does not expect the company’s operating outlook to improve until 2010, and forecasts an Ebitda decline in 2009.

Mexico’s Minera Autlan says it is paying off debt and looking to save money to minimize its risk amid the global financial crisis. The company said it will begin paying off $30m in debt starting in January. It expects to be done in three years, it said. Also, the miner said it expects to take a charge of $25m in the fourth quarter as a result of the cancellation of derivative structures. An additional $15m could be charged in the medium to long term, the company said. Autlan added that Ebitda stands at about $180m, which makes the company liquid enough to comply with its commitments. It also said its income is in US dollars, which it said protects the company from the devaluation of the local currency. Autlan recently called off a sale, amid talks that bids for the manganese miner dropped too low for the seller. Elsewhere, Mexican poultry producer Industrias Bachoco says it has lost $50m because of recent worldwide volatility in financial markets. Most of the mark-to-market loss on derivatives positions is spread over the rest of the year and first half of 2009. “Our solid financial structure is allowing us to deal with the present situation and meet all of our financial commitments,” says Cristobal Mondragon, Bachoco’s CEO. The pair follows a rash of similar losses from Mexican corporates including Vitro, Gruma and Posadas. Analysts expect more of the same.

Moody’s has chopped the Mexico’s Organizacion Soriana to Ba1 from Baa2 and kept a negative outlook amid fears about an aggressive liquidity profile caused by a shift towards CP issuance in recent months. The cut to junk affects MXP5.5bn in certificados bursatiles due 2012, MXP4.6bn in certificados bursatiles due 2010 and short-term debt of up to MXP6bn under the company’s MXP15billion certificados bursatiles program. “The downgrade also reflects Moody’s belief that Soriana may continue to maintain material short-term debt throughout 2009, which is contrary to the agency’s original expectations of short-term debt being largely eliminated by late 2008,” says the agency. It adds that uncommitted credit lines from certain relationship banks are not adequate CP backup, since their terms and actual funding remain subject to market conditions and are not legally binding. “The negative ratings outlook reflects the currently difficult and uncertain credit market conditions and the potential challenges these conditions may pose for the company’s liquidity requirements,” says Moody’s. It adds that Soriana maintains a negligible foreign currency exposure in its debt structure. Soriana is Mexico’s second largest food retailer in terms of revenues and one of the largest retail chains in Latin America.

Rating agencies have downgraded Mexico’s Gruma and Posadas amid derivatives related losses. A rating agency official tells LatinFinance that this may just be the tip of the iceberg, as analysts work overtime to reassess Mexico’s corporate balance sheet. Tortilla maker Gruma was demoted BBB minus to BB+ and BB, respectively, by both Fitch and S&P, including its $300m perpetual. Both agencies also assigned a negative outlook after Gruma has reported a $684m mark-to-market loss. “Derivative positions expose Gruma to large potential losses over time as these instruments roll-off during the next three years,” says Fitch. Gruma has approximately $140m in cash and committed credit facilities, and no significant maturities until July 2010, it adds. At June 30, total on-balance-sheet debt reached $620m, almost entirely dollar denominated, including the perp, a $150m syndicated credit facility due 2010 and a $40m revolver due 2011.It also has an 8.62% stake in Banorte, valued at approximately $275m, says Fitch. “Further volatility in the currency markets and/or margin calls from counterparties could severely affect the company’s financial profile,” says S&P analyst Enrique Gomez Tagle. Meanwhile, S&P axed hotel operator Grupo Posadas to BB minus (negative) from BB, after a $38m FX swap related loss. “The rating action also reflects the company’s financial policy, which has proven to be more aggressive than we expected,” says S&P analyst Monica Ponce. Other analysts say that corporates in Mexico and Brazil look particularly vulnerable to the crisis.

Mexico’s Banorte acknowledged it has MXP1bn in credit risk exposure to retailer CCM through an unsecured loan that expires in March. The loan represents 0.3% of its total assets and 0.5% of its total loans, it says, and claims it could recover part or all of the loan depending on the outcome of the retailer’s bankruptcy filing. Banorte said it isn’t counterparty to CCM’s derivatives operations, nor to those of Durango or Grupo Industrial Saltillo, with whom it does not have loans. CCM defaulted last week and entered restructuring. The collapse of Mexico’s third biggest supermarket chain follows the recent collapse of Durango.

Mexican glassmaker Vitro says its derivatives instruments have a negative position of $227m. It has complied with the necessary coverage requirements so far, it says, but is “maintaining close communication with counterparties,” to assure continued payment. Vitro added that a $33m portion of its position covering FX and interest rates, have not varied significantly during the last 10 days. Manufacturer Grupo Saltillo announced an MXP600m negative position this week, after retailer CCM saw its ratings chopped on similar liquidity concerns.

The IFC plans to launch a $150m debt facility to help mitigate potential liquidity shortfalls in Mexico’s housing finance sector. The Mexican Housing Finance Intervention Facility was structured in collaboration with SHF and the IDB and allows the IFC to purchase up to 15% of RMBS to offset future shortfalls in investor demand for these securities. The IFC can also provide credit enhancements to RMBS in the form of partial credit guarantees, in coordination with SHF, or by purchasing RMBS mezzanine risk tranches. “If there is an interruption in the local capital markets, our debt facility can step in and provide comfort to other investors that we are prepared to take senior as well as mezzanine risk, in order to encourage them to keep financing,” Atul Mehta, the IFC’s director for LatAm and Caribbean, tells LatinFinance. The IDB is considering a similar $150m facility, subject to approval next month. The IFC hopes the facility will serve as a model for products in other markets threatened by lack of liquidity. Since 2001, IFC has invested $531m to support Mexico’s housing finance sector.