Mexican Construction Firm Says It Set a Deal With Bondholders
By Joel MillmanStaff Reporter of The Wall Street Journal
MEXICO CITY -- Grupo Mexicano de Desarrollo SA, Mexico's fourth largest construction company, announced a settlement with international bondholders, ending two years of legal wrangling that went all the way to the U.S. Supreme Court.
GMD, as the construction company is known, made the deal with institutional investors led by Alliance Capital Management LP and Credit Suisse First Boston Corp., a unit of Credit Suisse Group, and seven Mexican banks. GMD defaulted on $250 million in guaranteed notes in August 1997. The banks also have been seeking payment on a basket of GMD corporate bank debt valued at $300 million.
Under terms of the debt restructuring, announced Thursday, GMD will transfer $195.7 million in assets to a master trust administered by a noncreditor bank. As those assets are liquidated into cash, the trust will distribute payments to bondholders and the seven Mexican banks.
Creditors can expect to receive about 37 cents on the dollar, an arrangement they say is better than the 7 to 11 cents they would normally expect to recover in a case against a construction company, which generally own few assets. And, because of Mexico's sclerotic bankruptcy procedures, they might not have recovered anything for three years or more.
"The deal as signed provides a much better recovery for our creditors, not only in the amount but in timing," said Federico Barcena, a partner at Mexico City consultancy Elek, Moreno Valle & Asociados, which acted as principal financial adviser to the bondholders group.