Geo, Urbi Lead Mexico Builder Slump on Loan Plan Skepticism

Corp. Geo SAB (GEOB) and Urbi Desarrollos Urbanos SAB (URBI*) led a plunge in Mexican homebuilders on speculation government loan guarantees won’t be enough to buttress the industry from a slump in cash flow.

Corp. Geo tumbled 7.7 percent, the most in two week, to 10.13 pesos at the close of Mexico City trading while Urbi declined 7.6 percent to 4.04 pesos. Desarrolladora Homex SAB (HOMEX*) fell 5.4 percent to 26.88 pesos. The Habita index of homebuilders dropped 5.4 percent.

Mexico’s government announced a program this week to cover as much as 30 percent of banks’ losses on loans made to the nation’s homebuilders. The companies’ securities have plunged this year amid disappointing earnings and credit rating reductions as balance sheets show a hemorrhaging of cash.

“It’s not clear that the guarantee program is going to be sufficient to really be the fix for the entire industry,” Robert L. Rauch, who helps oversee $3.3 billion as a partner and money manager at Gramercy Funds Management, said in a telephone interview.

Urbi’s $500 million of bonds due in 2022 tumbled 6.9 cents to 75.14 cents on the dollar at 4:58 p.m. in New York, the lowest price since the securities were issued in January 2012. The yield rose 1.65 percentage point to 14.87 percent.

Alberto Aguilar, a columnist with the Mexico City daily El Universal, reported that Urbi may have missed a $60 million payment on a loan from Prudential Financial Inc. Aguilar didn’t say how he obtained the information.

Alma Beltran, a press official at Urbi, said executives weren’t immediately available to comment because they were attending an industry event in New York. John Chartier, a spokesman at Prudential, declined to comment.

Analysts, traders and investors are meeting with government officials and companies today for the second day of a Mexican homebuilder event in New York.

To contact the reporters on this story: Danielle Verbrigghe in New York at dverbrigghe@bloomberg.net; Ben Bain in Mexico City at bbain2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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