Category: Regions

As Mexican corporates including Gruma, GISSA, Vitro, Comerci, Cemex, Nemak and Lamosa sit down with banks and investors to work out losses stemming from derivatives and soaring debt, the Mexican government has been actively involved in mediating and advising. In addition to its more publicized measures, such as its CP rollover program and USD auctions, Hacienda has through its various appendages sought to push often contentious discussions towards a practical solution, say officials. “We’re trying to coordinate these discussions and make them work,” Gerardo Rodriguez, head of public credit, tells LatinFinance. “We’ve played an important role in putting these talks on a path towards a conclusion, and slowly, I think we’re resolving these problems,” he adds. One tangible solution came last week, when Gruma announced it had reached a preliminary agreement with some of its derivatives counterparties to convert an outstanding negative position into a 7.5-year loan. Government officials say they assisted in that process and hope that more favorable outcomes will follow. Among the other initiatives the state is considering is having development banks like Nafin and Bancomext extend additional lines of credit to the troubled automotive and auto parts sectors, says one development bank official. The initiatives follow yesterday’s news that Mexico is rushing to prop up Cemex and keep the debt laden cement giant from getting entangled in a messy row with lenders. Rumors of the government’s plan to support corporates under pressure have been circling for weeks, but few outside Hacienda anticipated that the state would step in as boldly and swiftly as it appears to have done with the fallen Mexican blue chip. “We are sensitive to the possibility of systemic risk,” says a government official.
(For more see http://www.latinfinance.com/DailyBriefArticles/2170290/Latest_News/Mexico_Rescues_Cemex_Fears_Systemic_Risk.html)

Mexico retailer Grupo Gigante says fiscal authorities are investigating one of its subsidiaries in relation to transactions made abroad in conjunction with providers. In relation to that, it has registered a MXP485m provision to cover potential costs arising from the investigation. The company also announced it will invest MXP10bn as part of its 2009-2013 strategic plan. In 2009 alone, it says it plans to invest MXP1.4bn and forecasts sales will total MXP15bn, up from MXP8.4bn in 2008. Also for this year, it expects to open 108 units in all formats and create 1,816 jobs.

Moody’s has cut Bank of America Mexico’s global local currency deposit ratings to Baa3/prime-3 from A2/prime-2 and assigned a negative outlook. Moody’s also downgraded Merrill Lynch Mexico’s long term Mexican national scale issuer rating to Aa2.mx (negative) from Aaa.mx and confirmed the short term rating of MX-1. The actions follow last week’s moves on Bank of America Corporation and subsidiaries. “The performance of the Mexican subsidiary and its local franchise and financial metrics continue to position it well within the group of foreign wholesale bank peers operating in Mexico,” says the agency. “It appears that the difficulties faced by its parent bank have thus far had no material effect on the Mexican operations. Nevertheless, Moody’s negative outlook on the bank’s ratings is predicated on potential future pressures on [Bank of America Mexico] as it is so linked to a now weaker US parent. The negative outlook also incorporates the less favorable business and economic environment present in Mexico,” it adds.

Mexico is rushing to prop up Cemex and keep the debt laden cement giant from getting entangled in a messy row with lenders, say senior government officials involved in the process. Rumors of the government’s plan to support corporates under pressure have been circling for weeks, but few outside Hacienda anticipated that the state would step in as boldly and swiftly as it appears to have done with the fallen Mexican blue chip. “Cemex is a different case [from other troubled companies in Mexico] because of its importance to national economy and its complexity,” Gerardo Rodriguez, head of Mexico’s public credit department, tells LatinFinance. He says the government has chosen to take a more active role in mediating talks and even provide direct funding to Cemex, characterized by many observers as a national crown jewel. Following a series of meetings with Cemex and government officials in the past weeks, banks are heard having agreed to an extension of the next 2 years’ maturities and a subsequent scheduling out of remaining debt, though further details have not been disclosed. Most of Cemex’s lenders are foreign banks that lend to numerous Mexican companies. A contentious situation with a big client could convince increasingly conservative credit committees to pull out of the country and the region, warns a New York-based syndications banker. A banker at one of Hacienda’s departments says the government acknowledges that failing to ensure a successful workout could lead to a confidence crisis of vast proportions. “We are sensitive to the possibility of systemic risk,” says the government official, who points out Cemex has so far avoided default. While Cemex faced a seemingly unmanageable maturity hump – 73% of its $14bn in total comes due by year-end 2011, according to ING – it is an otherwise healthy, cash generating concern not toppled by ill advised derivative losses, say government officials. As such, supporting Cemex poses little risk of moral hazard and is consi

Controlling shareholders of the Mexican Bolsa have nominated former minister of transport and communications Luis Tellez to be its next president, the Bolsa says. The appointment will be voted on by all shareholders at a meeting to be scheduled for next month. Tellez, who has also served as energy minister and as an MD with The Carlyle Group, resigned from the government earlier this month following a scandal over recorded personal phone calls. Tellez would replace Guillermo Prieto, who has headed the stock exchange for the past 8 years. The Bolsa went public in June, raising $420m, in one of the last new equity issues the region has seen. Guillermo Medina, communication sub-director at the Bolsa, says Prieto and the controlling shareholders agreed that it was time for him to leave the presidency and let someone else take charge, now that the Bolsa is a public entity. He adds that the Bolsa’s previous president, Manuel Robleda, also left after 8 years. Some of the other candidates being considered for the post, Medina says, are Jonathan Davis, former president of the national securities and banking commission; José Antonio González, a director at the treasury ministry and Pedro Zorrilla, general adjunct director at the Bolsa.

Mexico plans to boost by MXP3.75bn the amount of 7 classes of government bonds it will sell in Q2, the finance ministry says. The decision to sell more 3, 5 and 10- year fixed-rate bonds, as well as 1, 3, 6 and 12-month Cetes follows a recent agreement committing Mexico’s pension funds to invest new funds in Mexican securities only for the next 12 months. Hacienda will raise the quarterly amount of 10-year bonds, sold every 6 weeks, to MXP4.0bn from MXP1.5bn in Q1, 3-year bonds sold monthly to MXP5.0bn from 4.5bn and 5-year notes sold monthly to MXP1.75bn from MXP1.50bn. Mexico also plans to sell MXP8bn each in Q2 of its 1, 3 and 6-month Cetes every week, compared with MXP7bn in Q1, and MXP7.5bn in 1-year bonds every 4 weeks, up from MXP7.0bn. The ministry said it does not plan to repurchase bonds during Q2.

Kimberly-Clark de Mexico has sold MXP3.5bn of bonds in the domestic market, marking the third non-financial corporate placement of 2009. The unit of the American tissue and diaper maker priced MXP2.7bn in 13-month paper at TIIE plus 120bp and MXP800m in 2016 notes at a 9.98% fixed, or Mbono plus 233bp. The tranches were 2.3x and 4.1x oversubscribed, respectively, according to a banker managing the transaction. The transaction, rated AAA on a national scale, follows bottlers Coca-Cola Femsa and Embotelladoras Arca, which secured 13-month paper at TIIE plus 80bp and 155bp, respectively. Banamex and HSBC managed the Kimberly-Clark transaction.