Bloomberg News

Mexico’s Sanluis Mulls Bond-Market Return as U.S. Car Sales Rise

January 22, 2014

Sanluis Corporacion SAB (SANLUISA), the Mexican auto-parts maker that missed bond payments in 2001 and 2010, may issue new debt this year as U.S. car sales and North American vehicle production buoy revenue.

The brakes-and-suspensions manufacturer is studying a bond sale of as much as $200 million, said Eugenio Madero, chief executive officer of the Sanluis Rassini North America unit. Sanluis, a supplier to General Motors Co. (GM:US) and Volkswagen AG, pulled an offering of $250 million in 10-year notes in 2012, citing market conditions.

Sanluis is looking to lower its debt costs amid an expansion in the North American auto industry that boosted third-quarter sales to a record. Revenue gains coupled with a projected $65 million reduction in debt this year may help the Mexico City-based company win another credit-rating upgrade after Standard & Poor’s raised it one step in August to B+, Madero said.

“We’re always working with international banks for better options for issuing bonds,” Madero said in an interview at the World Economic Forum’s annual meeting this week in Davos, Switzerland. “When the conditions are right, we’ll be delighted to do it.”

Net debt as of Sept. 30 was 1.7 times earnings before interest, taxes, depreciation and amortization, down from 2.3 times a year earlier. Debt totaled $242.5 million at the end of the third quarter, down 2.6 percent from a year earlier, the company said Oct. 23.

Sales Gains

U.S. auto sales are likely to surpass 16 million vehicles this year, bolstering production at Sanluis’s plants in Ohio and Mexico, Madero said. The company’s North America business, its biggest unit, may post an 8 percent gain in revenue, and its Brazil division may report a similar gain, he said.

Revenue advanced 14 percent to $617.4 million during the first nine months of 2013, including a 9 percent increase in North America and a 31 percent gain in Brazil. Ebitda in the period rose 23 percent to $85.7 million.

“We see a very good 2014, very good for the regions in which we operate,” Madero said. “We see a strong economic recovery in North America.”

U.S. auto sales rose 7.6 percent to 15.6 million in 2013, to give the industry its best year since 2007, according to researcher Autodata Corp.

Potential Acquisitions

Rising auto manufacturing in Mexico will also boost Sanluis as Ford Motor Co. (F:US) and GM expand production and Nissan Motor Co. (7201), Honda Motor Co. and Mazda Motor Corp. open new plants, Madero said. Sanluis is seeking to win supply contracts from Audi, Volkswagen’s luxury unit, when it opens a new factory in Mexico in 2016 to make Q5 sport-utility vehicles, he said.

Sanluis is also considering potential acquisitions in the U.S. and Brazil, as well as breaking into new markets in Europe and China, Madero said. No transactions are imminent.

“We’re not closing a deal in the next month,” he said. “We’ve got our eyes open and we’re studying possibilities.”

To contact the reporters on this story: Juan Pablo Spinetto in Davos, Switzerland at jspinetto@bloomberg.net; Brendan Case in Mexico City at bcase4@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; James Attwood at jattwood3@bloomberg.net


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