Dollar-Debt Blows up in Mexico, Pushes Biggest Construction Firm toward Abyss
by Don Quijones
WolfStreet.com
December 19, 2015
After weeks of false promises, rampant speculation, and furious denials, Mexico’s biggest construction company, ICA, finally admitted that it will not pay the $31 million in interest outstanding on $700 million worth of bonds. The company’s shares plunged 24% to 3.93 pesos on the news, its biggest one-day rout since 1999.
“ICA has made this decision in order [to] preserve liquidity, prioritize ongoing operations, and fund projects currently under development,” the firm said in a press release. “Over the next 30 to 60 days, with the help of its financial advisors, Rothschild and FTI Consulting, ICA will work on a cost-cutting and restructuring plan.”
If ICA fails to make payments on all of its $1.35 billion in overseas notes, it will become the biggest corporate bond defaulter in Mexico since Moody’s Investors Service began tracking the data in 1995, just after the eruption of Mexico’s Tequila Crisis.
Acute Vulnerability
The company’s travails began long ago but were recently magnified by political problems at home and economic forces overseas. Its revenues have sharply declined this year amidst infrastructure spending cutbacks by a fiscally challenged government, while the weaker peso has exacerbated the company’s leverage ratios.
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