Category: Regions

Mexico’s Vitro says it has reached stay agreements with derivatives counterparties Credit Suisse, Calyon, Merrill Lynch, Barclays and Citi. They have agreed to extend the deadline on a filling of Vitro’s initial responsive pledging in the supreme court of the state of New York and a stay of the litigation processes until April 24, allowing more time to negotiate agreement. “As evidenced by these stipulations, which can be renovated if the parties agree, we will continue exploring different alternatives and searching for creative ways to reach a favorable settlement,” says Vitro CEO Hugo Lara. “We expect Deutsche Bank, the remaining derivative counterparty will join today this amicable alternative in order to restructure our financial obligations,” he adds. Vitro has missed payments on local and dollar bonds, as well as derivatives, in an attempt to preserve enough cash to continue operations. Vitro said in January that its failure to pay approximately $293m, including approximately $80m held as cash collateral by counterparties, constitutes a default under its derivatives agreements. This triggered cross-default clauses for Vitro, which last year reported a net loss of approximately $358m, not including accrued interest. Blackstone is advising Vitro on a restructuring. Other Mexican corporates, including Comerci and GISSA are going through a similar process with derivatives counterparties, following their own substantial losses.

Grupo Industrial Saltillo (GISSA) is heard enmeshed in difficult talks with derivative counterparties to sort out positions in FX-related derivatives that moved against the Mexican corporate, say people familiar with the company’s status. An equity analyst covering the credit says there appears to be a disagreement on the values the company owes its counterparties. The industrial group said in November it reported net loss of MXP506m, largely due to derivatives markdowns. It said at the time that it was being told by investment banks to close outstanding derivatives positions. The company also saw its Ebitda shrink, leading it to trip leverage covenants on some of its bank debt. In February, GISSA said it managed to renegotiate MXP1.34bn in certificados bursatiles, extending the tenor on the notes another 10 years and restructuring the interest payment schedule to include a 3-year no-interest period. The note series are the GISSA 04-2 and 04-3, due 2019 with step up interest payments that incentivize the company to call the notes as early as possible. While it has yet to report its Q4 figures, GISSA is likely to have more bad news, and will inevitably have to renegotiate terms on its bank debt, say loan market participants. A GISSA finance official did not return calls.

Mexico’s pension funds were preparing late last week an agreement to buy only local securities for a 12-month period, a decision seen as a sign of confidence that could stimulate markets and cut financing costs. A formal agreement is expected in coming weeks, and would only apply to new funds invested by Afores. The potential inflow to Mexican equities could be $3.3bn by year-end, Merrill Lynch says in a report, using a conservative estimate where Siefores invest in domestic equities half the maximum allowable limits, or as much as $9.6bn with more aggressive investment. Walmex and Carlos Slim-owned America Movil, Carso Global Telecom, and Inbursa account for 49% of the IPC, Merrill says, and should benefit most from the inflow. The bank also expects stocks with a strong weight in the IPC and a low average daily trading volume to appreciate most as a result of potential new Afore investment. It highlights Penoles, Bimbo, Soriana and Slim’s Carso Global Telecom, Inbursa and Grupo Carso. The bolsa responded Friday with a 3% rise to 19,437. Goldman Sachs expects the measure to be innocuous for MXP, as the flow will be important for the availability of local credit, but small compared to the balance of payments. As of the end of January, Afores had $67bn of assets under management and 9.7% of assets invested in foreign securities. Inflows to the system average $500m equivalent per month.

Mexico’s Banorte is planning an issue of up to MXP5bn in 2019 and 2021 subordinated bonds, according to officials at the bank, a soon as this week. The bank can issue up to MXP2.5bn in each of 10-year and 12-year tranches, priced basis 28-day TIIE. Proceeds will be used to refinance debt due this year. The notes are rated Aaa/AA+ on a national scale and Banorte’s own brokerage is managing the sale. The bank sold MXP2.75bn in 10-year bonds from the same program in June, at TIIE plus 77bp. The issue is seen as a test for bank bonds and for corporate issues that might follow. Elsewhere, Bancomer still awaits a window to issue up to MXP3bn in 2-year notes, while Santander last week sold MXP1.2bn in 13-year subordinated bonds backed by government securities.