Urbi Desarrollos Urbanos SAB (URBI*), whose stock is the worst-performing member of Mexico’s benchmark index this year, said it’s considering restructuring debt as Barclays Plc (BARC) and Credit Suisse Group AG (CSGN) filed suits over financial derivatives.
Mexico’s third-largest homebuilder by sales hired Rothschild and other outside advisers to analyze options to improve liquidity and restructure debt, according to a statement today to Mexico’s stock exchange. Urbi, based in Mexicali, Mexico, said it’s disputing “certain claims arising from its financial derivative instruments” in U.S. courts.
Shares and bonds of Urbi and its peers have plunged this year as Mexican homebuilders struggle to adjust to a new government policy that promotes urban development over outlying single-family homes. The company’s 70 percent share decline this year is the worst on the nation’s benchmark IPC. Corp. Geo (GEOB) SAB, which announced April 12 that it will restructure debt, is the second-worst performer, dropping 64 percent.
Urbi hired Rothschild and other advisers “to support it in the review of its financial situation and the analysis of alternatives to improve its liquidity and restructure its financial liabilities in order to ensure the orderly continuation of its operations,” the company said.
Bloomberg first reported Urbi hired Rothschild on April 11, citing a person familiar with the matter.
According to U.S. court filings, Barclays’s Mexican unit sued Urbi for breach of contract, saying the builder failed to pay $3 million that was due March 15 after the bank had to terminate a 2010 swaps and derivatives agreement.
The Barclays unit said in a complaint filed April 8 in New York state court that it ended the agreement after Urbi didn’t post additional collateral in January “to cover potential losses relating to open transactions with the bank.” Urbi owes the Barclays unit $11.6 million, according to the complaint.
A Credit Suisse unit also sued Urbi, as well as a group of entities responsible for its payments to the Swiss bank, in New York state court.
According to an April 11 complaint, Urbi owes Credit Suisse International $10.9 million after the bank terminated a 2012 trade agreement related to currency option transactions. The Credit Suisse unit said in the complaint that it ended the agreement because of downgrades of Urbi’s debt last month by Fitch Ratings Inc. and Standard & Poor’s.
S&P downgraded Urbi to CCC from B on March 4 and placed the company on credit watch negative, citing 2012 financial results that were “significantly below” their expectations. Fitch downgraded the company to CCC from B on March 1, citing “substantial deterioration of Urbi’s liquidity during 2012, which has heightened the risk of default.”
Yields on the company’s dollar bonds due in 2022 have surged more than 14 percentage points in the last month to 33 percent, according to data compiled by Bloomberg.
President Enrique Pena Nieto is encouraging housing construction closer to cities, which Fitch Ratings said in a Feb. 22 report could hurt the value of some homebuilders’ current land reserves.
The cases are Barclays Bank Mexico SA v. Urbi Desarrollos Urbanos SAB de CV, 651226/2013, and Credit Suisse International v. Urbi Desarrollos Urbanos SAB de CV, 651318/2013, New York County Supreme Court (Manhattan).
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