Homex Says Rating Downgrade, Bank Lawsuits Spur Bond Default
Desarrolladora Homex SAB (HOMEX*), Mexico’s biggest homebuilder by sales, said credit-rating downgrades and lawsuits from Barclays Plc (BARC) and Credit Suisse Group AG (CSGN) over derivatives contracts have put the company in default on peso-denominated bonds.
The default affects 11.7 million pesos ($947,000) in senior guaranteed local-currency notes, Homex said today in a U.S. regulatory filing. Homex’s benchmark dollar bonds due in 2020 sank 3.16 cents to 36.94 cents on the dollar at 4 p.m. in Mexico City, according to data compiled by Bloomberg. Homex shares fell 6.6 percent to 8.84 pesos today.
Fitch Ratings cut Homex’s rating to CCC on April 30, citing the company’s first-quarter results. In a complaint filed May 9, Barclays said Homex failed to make required transfers of $1.7 million to the bank in April as collateral to cover potential losses, triggering a default. Barclays said Homex was obligated to pay 536.6 million pesos for the early termination of the contract. Credit Suisse is seeking $26.7 million from Homex after it requested last month that a 2009 agreement be canceled, the Swiss bank said in a complaint filed in New York State Supreme Court in Manhattan.
“Certain of the aforementioned 2013 matters arguably have resulted in an event of default under the terms of the company’s senior guaranteed Notes,” Homex said in the filing.
Brandon Ashcraft, a Barclays spokesman, declined to comment on the Homex statement. Drew Benson, a Credit Suisse spokesman, also declined to comment.
Bonds sold by Mexico’s biggest homebuilders have plunged this year as a shift in government policy to promote more capital-intensive apartments in urban areas over homes in commuter towns depleted their cash. Urbi Desarrollos Urbanos SAB and Corp. Geo SAB defaulted on bonds last month and have hired firms to advise them on possible restructurings.
To raise cash, Homex on April 19 agreed to sell its stake in two prisons to companies controlled by billionaire Carlos Slim. The company’s cash and equivalents tumbled 94 percent in the first three months of the year.
“I thought they were the one that was most likely to survive because they had the prison business,” Guillermo Rodriguez, a money manager who helps oversees about $6 billion at Corp. Actinver SAB, said in a telephone interview from Mexico City. “Everything is suggesting” the company will have to restructure its debt, he said.
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