ICA Turns to Martinez’s Fintech After Record Mexico Default

  • Builder gets $215 million convertible loan from financier
  • Housing, international operations to be wound down under plan

Empresas ICA SAB, the Mexican builder that defaulted on $1.35 billion in bonds last year, signed a $215 million convertible loan deal with investor David Martinez as the company seeks to restructure. Shares jumped the most in three weeks.

The loan from Martinez’s Fintech Europe SARL, backed by assets including ICA’s airport and prison holdings, carries a 16 percent interest rate that accrues and capitalizes monthly, the company said in a statement Friday. ICA also released a business plan that calls for winding down international and housing operations while focusing on construction activities in Mexico.

ICA is trying to stay afloat after building many of Mexico’s dams, highways, airports and subway systems since the company was founded in 1947. The builder halted payments on its overseas notes in December, which was nation’s biggest corporate bond default since Moody’s Investors Service started tracking the information 20 years earlier.

Fintech will probably profit from the deal while giving ICA a chance to finish existing projects and possibly win new ones, said Rafael Elias, head of emerging-market strategy at Cantor Fitzgerald. It’s too early to estimate how much bondholders might recover, he said.

Share Surge

ICA jumped 21 percent to 2.85 pesos at 1:45 p.m. in Mexico City after climbing as much as 25 percent for the biggest intraday gain in three weeks. Shares plunged 81 percent in the 12 months ending Thursday as the slump in crude prices forced the government to curtail infrastructure spending and the peso’s decline against the dollar made servicing foreign debt more expensive.

The company’s $500 million in bonds due 2021 rose 1.98 cents on the dollar to 16.73 cents, according to data compiled by Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Bondholder Carlos Legaspy said he was looking forward to sitting down and negotiating with ICA now that the Mexico City-based company is receiving additional funds to continue operating.

Ahead of Bondholders

“If they manage to turn the company around they will begin to pay David Martinez back and eventually begin to repay” bondholders, said Legaspy, who helps oversee $350 million including ICA bonds as the president of InSight Securities Inc. in Highland Park, Illinois. “But if they can’t turn the company around, David Martinez positioned himself in front of bondholders.”

ICA is targeting a pre-packaged bankruptcy agreement that would convert the defaulted bonds into equity, according to a person with direct knowledge of the plan. The company could reach such a deal in the next month, said the person, who asked not to be named because the details are private. Formal talks with bondholders haven’t started.

The loan from Martinez is earmarked for new projects and can’t be used to repay ICA’s debt, the person said.

ICA declined to comment on a potential bankruptcy filing or a conversion of debt into equity.

Vitro Restructuring

Martinez, the founder of hedge fund Fintech Advisory, is a veteran of corporate restructurings such as that of Vitro SAB, which fought creditors including billionaire Paul Singer after its 2009 default. The Mexican glassmaker finally reached a deal with the bondholder group in 2013 after courtroom battles in New York, Dallas, New Orleans and Mexico.

As part of the 2013 pact, Fintech agreed to buy $729.2 million of claims against Vitro for 85 cents on the dollar. In return, the company got a $235 million note from a Vitro subsidiary along with a 13 percent stake in the unit that was later converted to a 20 percent share in the parent company.

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