Mexico Faces Its Biggest Corporate Default In Two Decades As Construction Giant Misses Bond Payment
Back in August, we said that “Something Is Very Wrong At Mexico’s Largest Construction Company…“
“Let’s say, for argument’s sake, that you’re a big company in an emerging market and suddenly, a commodities crash for the ages and a “surprise” devaluation by the world’s engine for global growth and trade sends your country’s currency into a veritable tailspin,” we wrote. “If that were the case, just about the worst possible situation you could find yourself in would go something like this (adapted from Bloomberg): “Eighty-five percent of [your] backlog is denominated in the [home currency], which plunged to a record low this week [and] almost half of [your] debt is in foreign currencies, mostly dollars.”
That was the situation facing Empresas ICA SAB which had just spooked bond investors by selling a key 3% stake in an airport operator for $56 million in order to pay down debt.
Well, after turning in its worst quarter in nearly a decade and a half in October, Empresas ICA SAB missed an interest payment this week in what Bloomberg says is “just a prelude to what’s likely to be the biggest default in Mexico in at least two decades.” Some $31 million in debt service payments came due on Monday and the company elected to utilize a 30-day grace period to try and make the payment.
“Under the terms of the indenture governing the 2024 Notes, the use of the 30-day grace period does not result in an event of default,” the company said, cheerfully.
Carlos Legaspy, a money manager who holds ICA bonds due in 2017, 2021 and 2024, wasn’t as optimistic: “Do I think they’re going to pay within 30 days? No. The 30 days are not going to make any difference.” Here’s a look at the 2024s:
…click on the above link to read the rest of the article…
