Mexican glass maker Vitro SAB’s $1.5bn debt
restructuring offer is likely to be rejected by bondholders
this month, and investors can get a better deal if they
continue to fight, an analyst said this week.
Last Friday (August 6), Vitro’s bondholder
committee rejected a restructuring offer, estimated to be worth
44 cents on the dollar. But the company said it would push
ahead anyway and solicit the consent of bondholders in general
in August. Analysts believe the terms offered will be
effectively the same as the plan snubbed by the
This involved replacing outstanding debt with: a $500m eight
year bond with a coupon starting at 3% and stepping up by
1% a year; a $350m seven year partial payment in kind (Pik)
note with 3% and 4% coupons in the first two years and 8%
thereafter; $80m of five year convertible notes that can be
automatically swapped into shares; and a cash payment of
Vitro was caught with an imbalanced hedging position on natural
gas contracts in 2008, one of a wave of Mexican companies to
lose money on derivatives during the turmoil of that year. The
company said it would continue to seek a consensual agreement
with creditors, though negotiations have been stalled since
September last year.
"The consent solicitation that is to be sent out this month
— if it is based on the offer already set out
— will probably not be received well by the broader
creditor group," said Alexander Monroy, Latin American
corporate credit analyst at Barclays Capital.
He believes the company has a better ability to pay than it is
claiming in its offer. Vitro is projecting Ebitda of $205m for
this fiscal year, but according to Monroy its average
normalised Ebitda between 2004 and 2008 was $330m.
"The offer seems to be part of a strategy to retain as much
value for shareholders vis-à-vis creditors," he said.
"Creditors can probably get a better deal if they continue to
fight." Monroy believes Vitro could afford to pay 60-65 cents
on the dollar.