Latin Finance - January/February 2012 - 48

needs with CCM’s cash ﬂows. O ering creditors adequate guarantees for the new debt was also important. The agreement eventually o ered four di erent ﬁnancial packages to accommodate di erent unsecured creditor groups. Rothschild began advising CCM in January 2009 after the company had already tried to go through the concurso mercantil process but had been turned down by a judge twice. The most challenging hurdle for Rothschild was negotiating with four di erent groups of creditors, namely banks that sought their loan repayments, US bondholders, Mexican holders of short-term debt and the holders of unpaid derivative instruments that had gone sour in 2008, says Eugenio Torres, Rothchild’s Mexicobased managing director and country head. “At the time the company was questioning the validity of the derivative instruments it had signed o on,” he says. “The company’s acceptance of that [derivative debt] was important for the development of the derivatives market in Mexico.” The ﬁnal proposal allowed for 54% forgiveness on recognized debt with no equity dilution, in exchange for $1.67 billion in new debt – including two bond issues – a 1.95 billion peso issue due 2018 paying a 9.25% coupon, and another eight-year, $224 million issue paying a 7% coupon – as well as a syndicated 14.43 million peso loan with an average eightyear maturity, split into four tranches. An additional 1.46 billion pesos in Mexican commercial paper was also included. The loans were backed by mortgages held on several properties as well as a handful of trusts and several real estate assets. The deal also involved strict rules on the handling of surplus cash generated by the company – 60% would go to pay for loans, with the rest left for company operations. In exchange, CCM kept its operations and relationships with suppliers and clients una ected, and it continued to invest in the business, ensuring future growth. In August, a Mexican judge accepted the terms of the restructuring and less than four months later the court declared

CCM’s insolvency and the agreement was ﬁnally signed between CCM and its creditors. The insolvency process allowed the parties to go through a negotiation and bankruptcy in a matter of six months. The deal also set the stage for the company’s gradual recovery. By the end of 2010, revenues were back up 8% to $4.41 billion, and the total debt to Ebitda leverage measure had declined to 5.6 times. LF

Bahia Specialty Cellulose

Trade Finance

Marking a Milestone
ahia Specialty Cellulose faced challenging conditions to obtain $470 million in pre-export ﬁnancing in late 2010, with lending appetite still su ering the e ects of the 2008-2009 credit crisis. However, with Brazil being such an attractive market, says Claudio Cotrim, ﬁnancial director at parent company Sateri, many banks and funds saw it as a way to gain exposure to the country. “The secured package worked well for us and the lenders,” Cotrim says of the loan, which was secured by assignment of export contracts of Bahia’s trading company, a pledge of collection accounts and a mortgage on its Brazilian pulp mill. The wood pulp products company raised $470 million, topping the initial $400 million target. Santander and WestLB led the deal, which was divided into a ﬁve-year tranche, upsized to $425 million from $400 million, and a sevenyear $45 million tranche. The ﬁve-year tranche priced at 387.5 basis points over Libor, while the sevenyear priced at 425 basis points over. Bradesco and Itaú were also mandated as lead arrangers. Bahia had previously closed a syndicated loan in 2005, as part of its ﬁnancing for a brownﬁeld project in Brazil. Part of the proceeds from the new facility went to reﬁnance that debt. The

capital structure is expected to support the company’s growth over the next three to ﬁve years, Cotrim adds. “This cross-border ﬁnancing facility was groundbreaking, not only in itself but also as a key development milestone for the company,” Cotrim says. “It was fundamental to a strong capital structure, and put in place immediately prior to the IPO of [Sateri].” Hong Kong-listed Sateri had its IPO in December 2010. The loan at Bahia was done simultaneously and helped improve the overall ﬁnancial picture ahead of the parent’s IPO, says Nick Gowlland, senior VP of ﬁnance at Sateri. Credit conditions have since tightened, says Gowlland, explaining that the facility was achieved “on very competitive terms, for a good tenor,” and also that it puts the company in a strong position to do a similar deal down the road should the need arise. Though the company has no plans to raise money at present, it has capital expenditure plans for 2011-2013 of approximately $1 billion, and expects to look at ﬁnancing alternatives as needs arise. LF

ICA’s 7.1bn peso 22-Year ABS

Financial Innovation

In Praise of Novelty
ust as Latin America felt the e ects of credit woes across the Atlantic, Empresas ICA managed a historic bond issuance in its domestic market. Mexico’s largest construction company brought to market a 7.1 billion peso ($518 million), 22-year project bond, in what observers billed as the ﬁrst of its kind in the Latin American country. The bond backed by construction contracts was sold to banks and pension funds with the purpose of ﬁnancing the construction of two federal, mediumsecurity prisons. The ICA issue was a novelty in several

48 LATINFINANCE

January/February 2012

Latin Finance - January/February 2012

Table of Contents for the Digital Edition of Latin Finance - January/February 2012