Feb. 22 (Bloomberg) -- Grupo Posadas SAB, Latin America’s largest hotel company, is in the process of getting rid of a “very high” percentage of its currency swap contracts after the peso’s rally this year, an official said.
The company, which operates hotels in cities including Acapulco and Cancun, took out derivatives contracts to shift liabilities into dollars, matching them with revenue that’s partially denominated in the U.S. currency. The peso has gained 8.9 percent this year, tied with the Brazilian real for the most among 16 major currencies tracked by Bloomberg.
Posadas has “significantly” decreased its peso derivatives positions after the currency’s rally, Ruben Camiro, the company’s Mexico City-based chief financial officer, said in a telephone interview yesterday. “The idea is to get rid of substantially all of them.”
As the peso posted a Latin America-worst 11.4 percent loss in 2011, the company faced growing demands for collateral, known as margin calls, on $145 million in currency swap contracts it took out in 2008 to shift floating-rate peso debt into a fixed- rate dollar liability.
The peso’s slide forced Posadas to set aside an additional $14 million in collateral, pushing the total amount deposited to $32 million by the end of September, tying up money the company may need to meet bank debt, according to Standard & Poor’s.
While the currency may appreciate further, variables including Mexico’s July presidential elections and the European debt crisis present risks, Camiro said.
“The risks involved currently are far greater than the potential benefits,” he said.
While Posadas has unwound most of its derivatives, it’s not finished and details will be disclosed when the company releases fourth-quarter earnings by Feb. 27.
Posadas will also seek shareholder approval on March 7 to issue a convertible bond, Camiro said.
--Editor: Jonathan Roeder
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