Category: Mexico

Steel operator ArcelorMittal is planning to build a $600m steel mill in Mexico, the company announced. The new facility, which is expected to have a capacity of 1m metric tons of billet per year and a new bar rolling mill with a capacity of 500,000 metric tons, will produce carbon steel and bars including rebar, merchant bar quality and special bar products to serve the construction and automotive sectors, the company adds. ArcelorMittal is evaluating potential sites for the mill in Mexico as it ponders factors like logistics, supply chain and availability of resources to operate the plant, it says.

Less than a week before the commitment deadline for a $200m 5-year loan, Mexico’s Grupo Cementos Chihuahua (GCC) is heard facing resistance from prospective participants. The amortizing deal, which pays Libor plus 125bp, has not gained the desired traction owing to a number of exogenous factors, say bankers close to the process. Appetite for the deal led by BBVA is dampened by general markets uncertainty, which forces credit committees to be more selective, as well a cement sector concerns. “Some of it is spillover from the sector,” adds a banker involved, noting that while GCC has reported strong figures, its peers like Cemex have had sub-par performance recently. A 5-year tenor is also tough, says a banker away from the deal. ABN AMRO is heard to have taken an MLA ticket, while Wells Fargo and Barclays appear to each have taken small pieces, of $20m or less.

S&P has chopped the national-scale credit rating on GMAC Mexicana to BB from BBB minus. The action follows the downgrade of parent GMAC to B minus from B and reflects liquidity problems at parent General Motors caused by a decrease in sales. The agency also cut fellow lender Ford Credit de Mexico to BB from BBB minus. The action follows the lowering of parent Ford Motor to B minus from B, also due to weaker sales. The outlook for both is negative.

Morgan Stanley has hired Juan Dibildox in its Miami private wealth office to cover high net worth clients in Mexico. Dibildox will report to Jon Mallon, executive director and manager of the private wealth office in Miami. He was previously financial advisor at Lehman. Morgan Stanley this week announced the hiring of a team of four, including Ruben Lerner and Manuel Uranga to serve high net worth clients in LatAm, particularly Venezuela.

Mexican retailer Grupo Gigante has offered to buy the 50% it does not own of Office Depot Mexico for $430m. With the offer, Gigante expects to also obtain rights of expansion in LatAm for the Home Depot franchise, it says.

S&P has revised the outlook on Mexican chemicals company Mexichem to positive from stable while affirming its mxA long term local credit rating and mxA-1 short term credit rating, the agency says. The revised outlook is based in expectations of an improvement on the company’s business profile after securing a supply contract of one of its chemical products with Occidental Chemical Corporation and an announcement that is looking for a partner for a JV in the fluoride sector, the agency says. “We expect Mexichem to maintain a satisfactory financial profile, even with the projected investment in acquisitions for 2008 and the debt required to pay for them,” S&P adds.

In what it being dubbed a renewed commitment to LatAm, Citi says it is shifting its organizational structure in the region to employ a universal bank model it claims to have established in Mexico. The bank is naming country and regional heads to oversee the institution’s entire corporate and retail banking operations in each area. In Brazil Gustavo Marin will continue as CEO of Citi Brazil. In Central America and the Caribbean, Raul Anaya replaces Mauricio Samayoa as head of the two geographic areas, while Fernando Concha is named to lead South America excluding Brazil.

Fertinal, a privately held Mexican fertilizer producer, is seeking capital to restart operations and considering a number of options, including private equity and debt placements, say people close to the company. The Michoacan-headquartered producer, owned by the Covarrubias family, ran into trouble over the past several years and is emerging from bankruptcy. It hired UBS to advise on financing and strategic options, say executives familiar with the plans. A banker away from the company speculates that Fertinal’s enterprise value could be north of $2bn, while people closer to the firm say it has yet to provide production and revenue figures and any guess at values will be off the mark.

Moody’s has upgraded Minera Mexico’s senior unsecured rating on $56.4m on Series B notes due 2028 to Baa2 from Baa3. Moody’s also affirmed the Baa2 senior unsecured ratings of its parent, Southern Copper Corporation (SCC). Both have stable outlooks. The upgrade of Minera’s senior unsecured rating reflects the company’s materially reduced leverage profile following the repayment of $150m in April 2008, and improved financial metrics and free cash flow generation capacity as its operations benefit from the continuation of strong copper prices. “Given the improved performance at the mine and metallurgical operations, and the lower interest burden on the company, Moody’s expects Minera to continue to evidence acceptable coverage ratios even in a copper price downturn and despite the current lack of production from the Cananea mine, which is closed due to labor difficulties,” the agency adds. It also notes vulnerability to higher operating costs, expansion capital expenditure requirements, potential for aggressive dividend payment requirements by either SCC, or its parent, Grupo Mexico as well as the labor and political landscape in which Minera operates.

Mexico’s privately held Grupo R is set to secure a $600m 7.5-year syndicated loan to help finance the construction of La Muralla III, Mexico’s first deepwater drilling platform, say bankers close to the deal. The platform will cost up to $800m and is being financed with 75% debt and 25% equity from the sponsor. Leads WestLB and BBVA have provided Grupo R with a $150m bridge at an undisclosed rate to kick start construction. That will be eventually be fully refinanced with the $600m loan, which carries a single margin of Libor plus 175bp throughout the 2.5-year construction and 5-year post completion periods. Six other banks are heard to have joined the syndication. Post completion, Pemex is the offtaker for the first 3 years of the transaction and could renew the contract for the remaining 2 years, say bankers. Funding will be distributed to the sponsor as it completes construction milestones. La Muralla III represents an important first step for Pemex as it heads into deeper waters to replenish falling reserves. Other similar deals are likely to come in the future from Mexico, say bankers involved in the sector. Elsewhere in LatAm, there is activity on the near-term horizon. A number of platforms have been started for Petrobras, and several more are heard seeking financing in the coming months as the Brazilian company seeks to explore new discoveries.