Even the central bank frets about explosive dollar debt.
In August, the bonds of Mexico’s biggest construction company, ICA, had the dubious honor of being the worst performing corporate bonds across all emerging markets. At a time when emerging economies are slowing down and the total debt exposure of EM corporations has never been higher, this was no mean feat.
Then in October, ICA reported its biggest net loss in 14 years. And things have only deteriorated since.
The Real Pain Begins
Yesterday the company’s shares plummeted 22% on news that it would use a 30-day grace period to make a $31 million interest payment that was due this week. Today its shares, which have lost more than 75% of their value since January, fell a further 8% to 3.76 pesos, their lowest point in 21 years.
To make matters worse, the builder recently hired corporate restructuring specialist Rothschild & Co. as financial adviser, fuelling speculation that it will soon seek debt relief.
“Do I think they’re going to pay within 30 days? No,” said Carlos Legaspy, a money manager at InSight Securities and holds ICA bonds due in 2017, 2021, and 2024. “The 30 days are not going to make any difference.”
If ICA does fail to pay, it would be Mexico’s biggest bond default since the tumultuous days of the Tequila Crisis 20 years ago.
Too Little, Too Late
ICA’s problems began long ago but were recently magnified by political problems at home and economic forces overseas. The revenue reported by the…