Biggest Mexico Bond Defaulter Drops as Suspension Fears Loom

  • ICA trading was halted a second time after shares plunged 30%
  • Investors may see parallels to housing collapse, analyst says

Empresas ICA SAB, which defaulted last year on $1.35 billion in bonds, dropped to a record low before trading was halted a second time in the Friday session by the Mexican stock exchange.

The shares were halted twice on Friday morning, with the stock tumbling 30 percent to 1.70 pesos before the second cutoff at 8:55 a.m. in Mexico City. Volume surpassed the three-month daily average of 3.1 million shares in less than half an hour of trading.

“Funds, people in general, are pulling out before it’s suspended,” Javier Gayol, an analyst at Corporativo GBM SAB, said by telephone.

ICA’s debt-fueled woes are intensifying five months after the company carried out Mexico’s biggest bond default since Moody’s Investors Service began tracking the information in 1995. A shortage of funds “could severely impact our ability to continue as a going concern,” ICA said in a filing to U.S. regulators this week. The builder delayed filing its first-quarter earnings report and said it would publish the results by May 26.

ICA, based in Mexico City, didn’t immediately respond to requests for comment.

Homebuilder Memories

The builder’s possible suspension is bringing back memories from 2013 and 2014, when three publicly-traded homebuilders -- Desarrolladora Homex SAB, Urbi Desarrollos Urbanos SAB and Corp. Geo SAB -- were suspended after failing to report earnings. Homex and Geo have since started trading again while Urbi remains halted.

“The experience people had with the housing companies for example was that when they didn’t report, they were suspended,” Gayol said. “Investors risk losing it all.”

Some banks are halting payments on ICA construction projects due to the company’s lack of resources, Mexico City newspaper Reforma reported Thursday. The company has been unable to reach a deal with creditors, Excelsior newspaper said Friday.

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