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Urbi Bonds Tumble on Restructuring Report: Mexico City Mover

Bonds sold by Urbi Desarrollos Urbanos SAB, the Mexican homebuilder that’s hemorrhaging cash, tumbled on speculation it will seek to renegotiate debt.

Urbi bonds due in 2022 fell 6.1 cents to 87.28 cents on the dollar as of 11:54 a.m. in Mexico City after Alberto Aguilar, a columnist for El Universal newspaper, reported the company will seek to change the terms on 20 billion pesos ($1.56 billion) of debt. Notes from Desarrolladora Homex SAB, Mexico’s biggest homebuilder, also dropped.

Alma Beltran, a press official with Urbi, said the company isn’t engaged in restructuring talks while it pursues a plan to scale back growth over the next six quarters and reverse the negative free cash flow it reported in the second quarter. Urbi, Mexico’s third-largest homebuilder, is shrinking a rent-to-buy financing program that damped cash flow and refocusing its business on the country’s fastest growing metropolitan areas around the capital and in Guadalajara.

“It’s just rumors, but clearly the market is trading on this possibility,” said Klaus Spielkamp, a fixed-income trader at Bulltick Capital, a Miami-based brokerage that specializes in Latin American debt.

Yields on the 2022 bonds soared 1.16 percentage point to 12.05 percent, according to prices compiled by Bloomberg. Earlier in the day, they soared 2.19 percentage points to 13.08 percent, the highest since the bonds were issued in January.

“What we’re carrying out is a process of transforming the business,” Beltran said in a telephone interview from Mexicali, Mexico.

Urbi’s stock has plummeted 32 percent since it reported a second-quarter loss of 125 million pesos on July 27. The shares rose 0.5 percent to 7.76 pesos today.

Homex bonds due in 2020 fell 2.43 cents to 101.06 cents on the dollar, sending yields up 45 basis points, or 0.45 percentage point, to 9.55 percent.

Vania Fueyo, a spokeswoman for Homex, said the bonds were falling because of the report on Urbi, which is unrelated to Homex.

“It’s a contagion effect,” she said in an e-mail.

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