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Geo Falls as Mexican Homebuilder Misses Interest Payment

Corp. Geo SAB, Mexico’s second-biggest homebuilder by revenue, plunged the most in 14 years after the company said it would miss an interest payment and that cash tumbled by 84 percent during the first quarter.

The shares fell 22 percent to 4.68 pesos at 2:05 p.m. in Mexico City trading, the biggest drop on a closing basis since September 1998. The company’s dollar-denominated bonds due in 2022 lost 9.09 cents to a record low of 45.13 cents on the dollar, according to data compiled by Bloomberg.

Geo said today in a filing that it will miss an interest payment on bonds denominated in pesos. An earnings report released late yesterday showed that the Mexico City-based homebuilder’s cash and cash equivalents dropped by 84 percent to 371.4 million pesos as of March 31 from the end of 2012. The company had negative free cash flow to equity of 1.7 billion pesos during the quarter.

The missed bond payment “makes sense within this whole process, but we weren’t expecting it,” Carlos Hermosillo, an analyst with Grupo Financiero Banorte SAB, said in a telephone interview from Mexico City. “We’re all waiting to see what happens with the restructuring.”

Geo said on April 12 it hired Fians Capital to advise it on a possible restructuring.

The company on a conference call didn’t allow questions from analysts and investors, as it had in prior quarters.

The company’s finances have deteriorated this year along with those of the country’s other largest publicly-traded homebuilders as the government delayed payment of housing subsidies and shifted policy to promote more capital-intensive apartment construction in urban areas over single-family homes in commuter towns. The Mexico Habita Index of six publicly-traded builders is down 57 percent this year.

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