Urbi Surges Most Since December on Covenants: Mexico City Mover

Urbi Desarrollos Urbanos SAB, the nation’s third-largest publicly-traded homebuilder, surged the most in two months after saying it renegotiated bank debt covenants in danger of being broken.

The shares climbed 3.1 percent to 5.67 pesos at 2:43 p.m. in Mexico City, set for the biggest one-day gain since Dec. 14. The benchmark IPC index of 35 Mexican stocks fell 0.5 percent.

Urbi has renegotiated or gotten waivers on bank debt covenants it was close to violating, Antonio Jorge, an investor relations official for the homebuilder, said in a telephone interview yesterday from Mexico City. Mexicali, Mexico-based Urbi and its peers have struggled to end a cash hemorrhage as the government promotes apartment construction requiring more initial investment than single-unit buildings, a policy shift that has forced the industry to adapt.

“All the flexibility that they can get is positive,” Jorge Lagunas, who oversees $200 million in stocks at Grupo Financiero Interacciones SA, said in a telephone interview today from Mexico City.

Urbi shares trade at 0.3 times book value, compared with 3.1 times for the IPC index.

About 1 billion pesos ($78.8 million) of Urbi’s bank loans had a covenant stipulating that gross debt in the third quarter couldn’t exceed 4.25 times earnings before interest, taxes, depreciation and amortization, according to Jorge. The amount represents about 25 percent of the homebuilder’s bank debt and 5.7 percent of total obligations, he said.