Creditors Hail Fair Durango Deal

Conclusion of a restructuring by Durango, the Mexican paper company, just 6 months after filing for bankruptcy is viewed as broadly positive. “We think it is a fair deal for creditors and believe the company will benefit greatly from the deleveraging achieved,” Robert Rauch, partner at Gramercy, which led the bondholder committee, tells LatinFinance. Durango emerged from its second default in 6 years close after agreeing preliminary terms with holders of its 2017 bonds, of which $520m were issued in 2007 via Merrill Lynch. While the workout process leaves much to be desired, a relatively fast resolution that implies a potential recovery value of 40-50 cents on the dollar is an encouraging sign for LatAm distressed debt, says ING corporate debt analyst Eric Ollom. “This shows that recovery values in LatAm should be higher than in the US because the leverage [in the region] is much lower,” says Ollom. Durango’s proposal involves a major haircut to par holders, but a substantial lift to anyone who bought in over the past several weeks, says Ollom. The notes traded as low as 14 cents on the dollar in early march, according to one high-yield broker. They jumped to around 32-34 Wednesday, from 27-29 Tuesday, according sellside and buyside shops. Durango’s resolution, alongside Gruma’s recent announcement of a deal with derivatives counterparties, can be read as an encouraging sign for cases like Vitro, Comerci, Sadia and even Arantes and Independencia, which are still restructuring their liabilities, says the analyst.