Urbi Desarrollos Urbanos SAB (URBI*) shares and bonds plunged as the Mexican homebuilder faces complaints from Barclays Plc (BARC) and Credit Suisse Group AG (CSGN) that it failed to make payments on derivatives contracts.
Urbi shares fell 14 percent to 2.08 pesos today in Mexico City trading, the lowest closing price since the company went public in 2004. The Mexicali-based company’s dollar bonds due in 2022 fell 3.02 cents to 31.09 cents on the dollar, according to data compiled by Bloomberg.
Barclays, based in London, said in a lawsuit in state court in New York this month that Urbi missed a margin call earlier this year and has since failed to make a required $11.6 million payment. Credit Suisse, based in Zurich, said in a separate complaint filed April 11 that Urbi failed to make a $10.9 million payment on a derivatives transaction.
“They’re starting to breach their obligations,” Jorge Lagunas, who oversees about $200 million in stocks at Grupo Financiero Interacciones SA, said in a telephone interview from Mexico City. “It’s a bad sign.”
Urbi, Mexico’s third-biggest homebuilder by sales, said in a regulatory filing yesterday that it’s disputing “certain claims arising from its financial derivative instruments” in U.S. courts, without naming any plaintiffs. The company has hired Rothschild and other advisers to review its finances and help analyze options including a debt restructuring.
Drew Benson, a New York-based spokesman for Credit Suisse, declined to comment, as did Brandon Ashcraft, a Barclays spokesman.
Securities of Mexico’s biggest publicly traded homebuilders have plummeted this year as the government shifts subsidies to promote capital-intensive apartment buildings in urban areas over single-family houses in commuter towns or the countryside. Subsidized developments beyond city limits have backfired as workers began shunning commuting costs to return to urban living, according to the government.
Home repossessions more than doubled last year to a record 43,853 from 2011, according to Infonavit, the state-backed lender responsible for about 70 percent of home loans in Mexico.
Urbi’s shares have fallen 74 percent this year, the biggest drop in the Habita Index (HABITA) of six Mexican homebuilders.
Desarrolladora Homex SAB (HOMEX*), Mexico’s biggest homebuilder, said this week it’s considering issuing junior debt and selling assets to raise cash in an attempt to avoid a debt restructuring. Shares of Culiacan-based Homex fell 10 percent today, leaving them down 57 percent this year.
Corp. Geo SAB, Mexico’s second-biggest homebuilder by revenue, has hired Fians Capital to provide advice with the “principal objective of generating efficiencies and reviewing alternatives for restructuring its debt,” according to an April 12 filing with the Mexican stock exchange.
The Habita gauge of homebuilders fell to a record low 0.3 times book value today, according to data compiled by Bloomberg. Urbi trades at 0.1 times book, the data show.
The Mexican housing sector “might offer some interesting opportunities if the risks are well accounted for,” UBS AG analyst Marimar Torreblanca said in a research report today. “Everything has a price.” The bank has a buy recommendation on Geo and Homex and the equivalent of hold on Urbi, according to the UBS report.
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