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Government Says NO To Mexicana...  
User currently offlineJJJM From United States of America, joined Mar 2000, 225 posts, RR: 0
Posted (4 years 4 months 3 weeks 6 days 16 hours ago) and read 12135 times:

Bad News for Mexicana.

http://www.exonline.com.mx/diario/no...e_para_mexicana_de_aviacion/961450

http://www.exonline.com.mx/diario/no..._quiebra,_unica_alternativa/961453

Sorry only in spanish...

regards

JJJM

16 replies: All unread, jump to last
 
User currently offlinerealsim From Spain, joined Apr 2010, 656 posts, RR: 0
Reply 1, posted (4 years 4 months 3 weeks 6 days 15 hours ago) and read 12089 times:

Sorry for my ignorance, but I haven't studied Commercial Law yet... What does this mean in simple words? What's the future for MX? Be adquired by AM?  

User currently offlineBraniff747SP From United States of America, joined Oct 2008, 2997 posts, RR: 1
Reply 2, posted (4 years 4 months 3 weeks 6 days 15 hours ago) and read 11939 times:

Chrome translator:

Quoting Excelsior:

There will be no bailout for Mexicana Airlines

Alicia Valverde, Fernando and Jorge Franco Ramos


Grupo Mexico announced yesterday that the National Foreign Trade Bank (Bancomext) told him of his decision not to Board of Directors the proposal to guarantee up to $ 60 million from a bond issue structured announced in recent days.

In a statement, the airline president said yesterday Gaston Azcarraga for the company to consolidate sources of long-term financing at competitive terms is a desirable and important step, but not urgent.

"While the partial guarantee Bancomext is an element that will not be available for a transaction in international markets, the company will continue analyzing and weighing various options to improve its financial profile," he said.

He reiterated that although they were convinced that the proposed transaction was the best choice not only for Mexico but for the Bancomex, "we turn the page."

Mexican Bancomext respects the decision and reiterated its belief that the transaction raised was a positive option for the airline industry in the country to Bancomext and financing the global profile of the company.

"Mexicana firmly rejects the bond issue by 250 million dollars with part-Bancomext endorsement was a rescue, he said.

He said that the existence of a ransom must be a transfer of assets between State property and assets of a private company.

The company added that redemptions always involve a fiscal cost to the exchequer and one of these two conditions are presented in the scheme to provide a partial guarantee, secured by a collateral capacity. He added that the credit granted in October 2009 by Bancomext on their terms continue in force until the conclusion of its October 2011 term and promptly comply with its payment obligations.

Excelsior published last week that the company received a loan of 991.7 million dollars with a term of two years, by Bancomext. However, now sought to issue a bond for $ 250 million in international markets, and 24 percent of that figure, intended, which supports the government.  

Bad for the airline, but not terrible, it seems.



The 747 will always be the TRUE queen of the skies!
User currently offlineEddieDude From Mexico, joined Nov 2003, 7591 posts, RR: 42
Reply 3, posted (4 years 4 months 3 weeks 6 days 14 hours ago) and read 11469 times:

Quoting realsim (Reply 1):
Sorry for my ignorance, but I haven't studied Commercial Law yet... What does this mean in simple words?

Well, essentially, MX is in a difficult position regarding liquidity. But this does not mean it will be put up for sale or will liquidate. Those scenarios seem very improbable.

As you know, MX obtained last year (after the swine flu epidemic) a 2-year Bancomext (Mexico's Eximbank) loan in the amount of 991 million pesos, which at the current exchange rate is approximately 77 million dollars. It appears that some weeks ago, MX tried to get Bancomext to extend the maturity of the loan, but Bancomext refused.

So, MX's plan B was to make a private placement of notes outside of Mexico pursuant to Rule 144A and Regulation S, in the amount of 250 million dollars. The proceeds of the note offering were going to be used to repay the Bancomext loan and a 150 million dollar Banorte loan, with the remainder destined to satisfy working capital requirements. In other words, the offering was basically a refinancing of MX's debt. From what I have read on the news, the offering depended to a large extent on MX obtaining Bancomext's guarantee with respect to 60 million dollars, so now that Bancomext has refused to act as guarantor, the note offering is pretty much a no go.

Long story short, MX is back where it started. MX is stuck with the loans from Banorte and Bancomext (this one is due 2011), and no source of fresh cash.

MX will have to generate a lot of cash flow so it can continue servicing its debt and, at the same time, continue with its growth plans. I don't know if there is a plan C such as (i) a capital call so that the current shareholders will make additional investments; (ii) an issuance of new shares to a strategic investor; (iii) trying to take new loans; (iv) making an issuance of peso-denominated debt securities in the local market; or (v) spinning-off its f.f. program. It will be interesting to see what MX does next to improve its balance sheet.

MX is now accusing AM and Grupo Imagen (a media company with interests in newspapers, radio stations and a small television channel that is owned by the same guys who own Hoteles Camino Real and other businesses) of orchestrating a weeks-long media campaign against MX's Rule 144A offering and, specifically, designed to dissuade Bancomext to partially guarantee the Rule 144A notes.



Next flights: MEX-GRU (AM 77E), GRU-GIG (JJ A320), SDU-CGH (G3 73H), GRU-MEX (JJ A332).
User currently offlinesteve6666 From United Kingdom, joined Sep 2003, 413 posts, RR: 0
Reply 4, posted (4 years 4 months 3 weeks 5 days 22 hours ago) and read 9840 times:

Quoting Braniff747SP (Reply 2):
Grupo Mexico announced yesterday that the National Foreign Trade Bank (Bancomext) told him of his decision not to Board of Directors the proposal to guarantee up to $ 60 million from a bond issue structured announced in recent days.

I'm suspecting this is a literal translation of Grupo Mexicana by a translation tool and not an indication that the world's 3rd or 4th largest copper mining company owns Mexicana.......



eu nasci ha dez mil anos atras, e nao tem nada nesse mundo que eu nao saiba demais
User currently offlineATLFlyer323 From United States of America, joined Jan 2005, 617 posts, RR: 0
Reply 5, posted (4 years 4 months 3 weeks 5 days 21 hours ago) and read 8938 times:

Is AM facing the same cash problems as MX? For some reason I always was under the impression that MX was the better run of the two airlines.

-Brandon



Everyday, the fluffy temptation of wheat!
User currently offlineEddieDude From Mexico, joined Nov 2003, 7591 posts, RR: 42
Reply 6, posted (4 years 4 months 3 weeks 5 days 19 hours ago) and read 7709 times:

Quoting steve6666 (Reply 4):
I'm suspecting this is a literal translation of Grupo Mexicana by a translation tool and not an indication that the world's 3rd or 4th largest copper mining company owns Mexicana.......

Yes, no such thing as a relationship between Grupo México and MX. Just an online translator quirk.



Next flights: MEX-GRU (AM 77E), GRU-GIG (JJ A320), SDU-CGH (G3 73H), GRU-MEX (JJ A332).
User currently offlineDoona From Sweden, joined Feb 2005, 3771 posts, RR: 13
Reply 7, posted (4 years 4 months 3 weeks 5 days 19 hours ago) and read 7392 times:

Quoting JJJM (Thread starter):

Please, this is an English language forum. There's nothing wrong with posting links to a story in another language, but please include at least a short summary in English. "Government says NO to Mexicana" doesn't really give that much information.

Sure, one can always run it through Google Translate, but I still think you should include more.

Cheers
Mats



Sure, we're concerned for our lives. Just not as concerned as saving 9 bucks on a roundtrip to Ft. Myers.
User currently offlineskyone From Mexico, joined Feb 2001, 433 posts, RR: 0
Reply 8, posted (4 years 4 months 3 weeks 5 days 19 hours ago) and read 7069 times:

Quoting ATLFlyer323 (Reply 5):
Is AM facing the same cash problems as MX? For some reason I always was under the impression that MX was the better run of the two airlines.

And your thoughts are correct. Although MX is doing everything possible to refinance its debt in order to go public (yes, IPO next year is what they want) and wants to have a more balanced balance sheet, if you can say it this way. AM, on the other side, is having problems everywhere, opening international routes to compete against MX where MX has a solid business in both Central/South America and USA. The thing is AM only bleeds money and then has to beg its new owners (including an American Bank) for fresh money. Just look at how the TUA new schedule payments affected them when Airports decided to cut the time they use to give AM to repay this Airport tax.

Of course AM didn´t want MX to get public back up for the bond they wanted to sell. Remember AM top management use to work for the government and also the new owners have conections up there. But sooner or later, AM will have to face its own reality, and that is that they do not have a profitable airline and that its business plan is worthless in an environment where there are two flag carriers and a couple of LCC that compete against them. AM is trying to grow internationaly while MX is already bigger than them internationaly, because yields in domestic routes are way down and that is AM main source of revenue.

So all in all, AM discovered that MX business strategy is better than theirs and now they want to make up for it. What MX needs to do is stay away from public institutions, and stick to private banks. Then, just keep going forward with their strategy and AM will always be the number 2 airline in Mexico, unless they merge, but in merging, AM will have to accept that MX is worth more than they are, and they aren´t just ready for it (call it pride of owners and management).


User currently offlinenetjetsintl From United States of America, joined Jul 2009, 593 posts, RR: 0
Reply 9, posted (4 years 4 months 3 weeks 5 days 14 hours ago) and read 4053 times:

Quoting ATLFlyer323 (Reply 5):
Is AM facing the same cash problems as MX? For some reason I always was under the impression that MX was the better run of the two airlines.

that's my understanding, Mexicana is MUCH better run than Aeromexico.. but 2009 was just too much for an airline to take. First the global reccession, then the swine flu outbreak.


User currently offlineUAL747DEN From United States of America, joined Dec 2003, 2392 posts, RR: 11
Reply 10, posted (4 years 4 months 3 weeks 5 days 14 hours ago) and read 4001 times:

Quoting skyone (Reply 8):
So all in all, AM discovered that MX business strategy is better than theirs and now they want to make up for it. What MX needs to do is stay away from public institutions, and stick to private banks. Then, just keep going forward with their strategy and AM will always be the number 2 airline in Mexico, unless they merge, but in merging, AM will have to accept that MX is worth more than they are, and they aren´t just ready for it (call it pride of owners and management).

It appears to me as if AM might be in a position to acquire MX next year if they are unable to find someone to provide them with some major financial support. I could be wrong but from the very little I know it looks like MX is is a very bad position right now and will do whatever it takes to get some cash.



/// UNITED AIRLINES
User currently offlineATLFlyer323 From United States of America, joined Jan 2005, 617 posts, RR: 0
Reply 11, posted (4 years 4 months 3 weeks 5 days 13 hours ago) and read 3960 times:

Thanks for the info Skyone!

-Brandon



Everyday, the fluffy temptation of wheat!
User currently offlineskyone From Mexico, joined Feb 2001, 433 posts, RR: 0
Reply 12, posted (4 years 4 months 3 weeks 5 days 11 hours ago) and read 3716 times:

Quoting UAL747DEN (Reply 10):
It appears to me as if AM might be in a position to acquire MX next year if they are unable to find someone to provide them with some major financial support. I could be wrong but from the very little I know it looks like MX is is a very bad position right now and will do whatever it takes to get some cash.

Don´t think so my friend... AM doesn´t have the money it needs to acquire MX. Although MX hasn´t either in order to get AM. But from the two, the worst is AM, as they have been bleeding more money because their primiry source of income comes from Domestic Fares/Network and their management team isn´t as good as MX s.

Just so you can see, there was an atempt to merge (like CO/UA), but AM withdrew from the idea when a third party aviation consulting firm that both hired told them MX would be 60% and AM 40% of the new airline as MX was worth a lot more thanks to its bigger international route network and the better management it had. AM at least wanted a merger of equals, but when they learned this, their pride made them trash all merger talks.

This doesn´t mean I like more MX than AM, as I actually do not like any of the two as a passenger. I usually stick to the USA Airlines when travelling between Mexico and the US and to European or USA Airlines when travelling to Europe or Asia. When intra mexico, I usually use Volaris with its constant $50 USD all in fares (I only travel around Mexico for leisure).

So all in all, I would say MX has an advantage over AM on the long run. The only thing MX wants to do is position the Airline for an IPO by taking care of its debts in a way that would not hurt the airline in the short term (renogociating short term debt and turning it into long term with better terms now that the markets have cooled). Remember Cash Flow and Balance Sheet are key words in this industry when trying to go public.


User currently offlinecx340 From Mexico, joined Sep 2000, 609 posts, RR: 3
Reply 13, posted (4 years 4 months 3 weeks 5 days 9 hours ago) and read 3476 times:

Ahhhh, I wish I could say more on this! But Eddie has got it quite right as usual.

Quoting EddieDude (Reply 3):
Long story short, MX is back where it started. MX is stuck with the loans from Banorte and Bancomext (this one is due 2011), and no source of fresh cash.

MX will have to generate a lot of cash flow so it can continue servicing its debt and, at the same time, continue with its growth plans. I don't know if there is a plan C such as (i) a capital call so that the current shareholders will make additional investments; (ii) an issuance of new shares to a strategic investor; (iii) trying to take new loans; (iv) making an issuance of peso-denominated debt securities in the local market; or (v) spinning-off its f.f. program. It will be interesting to see what MX does next to improve its balance sheet.

The issue for MX right now is Bancomext, not Banorte; the Bancomext Loan has earlier maturity dates. This does not mean MX is unable or unwilling to pay, it just means that it was desirable to extend maturity and/or take Bancomext or Banorte out of the picture with proceeds from the Reg S and therefore obtain longer-term financing. Out of the options posed by Eddie, I think you can probably rule out numbers (iii), (iv) and (v), because no one is likely to either accept unsecured debt (cebures or whatever), or grant loans, as many of MX's important assets are already acting as security for current loans; their Frecuenta FF Program is most likely not worth much. I think Messrs. Azcárraga & Co. will need to take the wallet out at least for a while. . .

About the amangment team, well, yes I still think MX's is better, but we will see how their new CFO handles the package. . .I'm surprised no one posted the news on the very sudden exit of their past CFO a couple weeks ago. Nasty business!


User currently offlineUAL747DEN From United States of America, joined Dec 2003, 2392 posts, RR: 11
Reply 14, posted (4 years 4 months 3 weeks 5 days 8 hours ago) and read 3411 times:

Quoting skyone (Reply 12):
So all in all, I would say MX has an advantage over AM on the long run. The only thing MX wants to do is position the Airline for an IPO by taking care of its debts in a way that would not hurt the airline in the short term (renogociating short term debt and turning it into long term with better terms now that the markets have cooled). Remember Cash Flow and Balance Sheet are key words in this industry when trying to go public.

I really have little to no info on either airline my only knowledge comes from a conversation I had with an AA executive recently on my way home from Japan.
I was told pretty much what you are saying, he seemed to think that MX was more worried about taking care of the short term debt just to make the IPO "workable" and his thoughts were that the people at MX really were not all to concerned with the long term future of the company as he said they were willing to put themselves in a pretty bad long term position if it looked good on the books today. He also seemed to think that AM was in a better position to find investors for an MX takeover.

Like I said I really know nothing of the two financially, this is just what I got from my conversation.



/// UNITED AIRLINES
User currently offlineEddieDude From Mexico, joined Nov 2003, 7591 posts, RR: 42
Reply 15, posted (4 years 4 months 3 weeks 5 days 6 hours ago) and read 3266 times:

Quoting cx340 (Reply 13):
The issue for MX right now is Bancomext, not Banorte; the Bancomext Loan has earlier maturity dates.

Yep, the Bancomext loan matures in 2011, so MX does not have much time to refinance.

Quoting UAL747DEN (Reply 14):
I was told pretty much what you are saying, he seemed to think that MX was more worried about taking care of the short term debt just to make the IPO "workable" and his thoughts were that the people at MX really were not all to concerned with the long term future of the company as he said they were willing to put themselves in a pretty bad long term position if it looked good on the books today.

I really hate to say this, but an IPO in 2011 sounds unrealistic. I think it is too ambitious and even naïve to think that there will be investors interested in buying shares of an airline with so many liabilities and a recent history of losses.



Next flights: MEX-GRU (AM 77E), GRU-GIG (JJ A320), SDU-CGH (G3 73H), GRU-MEX (JJ A332).
User currently offlinecx340 From Mexico, joined Sep 2000, 609 posts, RR: 3
Reply 16, posted (4 years 4 months 3 weeks 4 days 18 hours ago) and read 2876 times:

Quoting EddieDude (Reply 15):
really hate to say this, but an IPO in 2011 sounds unrealistic. I think it is too ambitious and even naïve to think that there will be investors interested in buying shares of an airline with so many liabilities and a recent history of losses.

Exactly; and we are not just talking about bank/commercial liabilities here; MX's labor contingencieas are mounstruous, to say the least.


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