HXM - Homex Development (ADR)

[king888]

Anyone has a look into this company. Largest housebuilding company in Mexico  currently trading at historical low.    The Nicolás (company's founder)  had their share in trust which got a margin call and that made 3.7 million ADR being dumped in the market during April 15, 2013 and April 19, 2013  .

 

http://www.sec.gov/Archives/edgar/data/1293153/000110465913030970/a13-10382_1sc13da.htm

 

Shares price hitting a new low might cause a another margin call from the founder again.  The valuation level looks tempting . But I have no clue about Mexican housing market. Is it subprime crisis all over again in Mexico ?  Or is it just the problem with Homex's products that are no longer needed by the Mexicans without government-backed mortgage ?

 

Mexico’s Record Foreclosures Impeding Home Ownership: Mortgages

http://www.businessweek.com/news/2013-05-01/mexico-s-record-foreclosures-impeding-home-ownership-mortgages

 

Mexico's smaller homebuilders set to gain as top three struggle

http://www.reuters.com/article/2013/04/12/us-mexico-homebuilders-idUSBRE93B0X720130412

[PlanMaestro]

BeyondBrics is doing a good job at it. Read in reverse order.

 

http://blogs.ft.com/beyond-brics/tag/mexico-homebuilders/#axzz2S3BKBASL

 

Regarding how serious is the new government in his plans, you can ask Slim. If they managed to go past Slim, nothing can stop their reform plans if they are serious about it. (America Movil is one to check)

 

http://blogs.ft.com/beyond-brics/2013/05/01/mexico-telecoms-reform-almost-there/#axzz2S3BKBASL

 

Difficult to find a margin of safety with such short term liabilities. And you can always count on Mexican CFOs making boneheaded derivatives or a funding decision not clearly disclosed in the financial statements. On the good side, the Mexican bankruptcy system gives a lot more leeway to equity-holders than the US system, as anyone following the Vitro saga can attest.

 

http://blogs.ft.com/beyond-brics/2011/11/02/shaken-and-stirred-vitros-bondholder-face-off-tests-mexicos-bankruptcy-law/#axzz2S3BKBASL

http://online.wsj.com/article/BT-CO-20130304-714938-search.html

 

I am having lunch tomorrow with a developer friend. I may have more to say then.

[king888]

Thanks, Plan  :D

Keep us posted

[PlanMaestro]

http://eleconomista.com.mx/mercados-estadisticas/2013/05/23/infonavit-detiene-pagos-geo-homex-urbi

[Packer16]

The bonds trade in the 30s.  They appear the way to play this company if there is any value left.

 

Packer

[constructive]

The bonds trade in the 30s.  They appear the way to play this company if there is any value left.

 

Packer

 

Wow, impressive. As much as the equity market dislikes HMX, it seems the debt market hates it much more.

 

Would you prefer the 2015s or go further out?

 

http://quicktake.morningstar.com/StockNet/bonds.aspx?Symbol=HXM&Country=USA

[Packer16]

You need figure how much of the firm value is left first.  These are also probably sub debt (since they are converts) so you also need to subtract the senior debt to see whats left.  If these are abandoned communities then there value may not be much.  I will check to what the senior debt is trading for tomorrow.

 

Packer

[PlanMaestro]

http://www.roicblog.com/mexico-homebuilders-in-distress/

[Phaceliacapital]

IN THE town of Melchor Ocampo, an hour’s drive from the capital, old Mexico and new Mexico collide. A graceful hacienda is ringed with tall trees, with horses grazing in the lush pastures alongside. Next door is Parque San Mateo, a shadeless concrete sprawl of 6,000 homes. Its developer, Homex, also puts up prisons. It shows.

 

Homex, like Mexico’s other two leading housebuilders, Geo and Urbi, is now in need of its own get-out-of-jail-free card. It is in a financial mess, caused by changes in housing policy accelerated by the new president, Enrique Peña Nieto.

 

His government has sought to end construction of the garish housing estates that have blotted the landscape in remote areas where land is cheap. It wants to focus instead on “vertical” (high-rise) dwellings closer to city centres, which may not be every aspiring middle-class Mexican’s shot of tequila, but at least mean a shorter commute and better access to transport, water and electricity.

 

The hiatus, as one policy gives way to another, has caused home sales to plummet, with severe financial consequences. Geo and Urbi have missed interest payments to creditors since April and are trying to restructure their debts. Banks in New York are suing Homex and Urbi for failure to post collateral related to derivatives transactions. Their share prices have plunged (see chart).

 

 

 

On May 30th, after The Economist went to press, Mr Peña’s government was due to flesh out a national housing plan, outlined in February, that was likely to give both the companies and their creditors a better idea of the new housing requirements. There were few indications that the authorities would directly bail out the homebuilders. But a clearer policy would help the companies draw up new business plans, which they could then present to creditor banks as a basis for restructuring talks.

 

Eduardo Cepeda, president of J.P. Morgan in Mexico, said private-debt workouts would be a sign of maturity in Mexico’s financial system, noting that Mexican banks fortunately have the capital to withstand a hit to their balance-sheets. “Everyone will have to take losses. If you don’t recognise your losses, you cannot move on,” he says.

 

Already, the financial problems are having bricks-and-mortar consequences. Residents gathered in the plaza of Parque San Mateo to celebrate Mother’s Day in May issued a litany of complaints the moment the mariachi music stopped. They said electricity generators keep running out of diesel and cutting out. A promised new road cutting travel times to shops and hospitals is still unbuilt. Many homes stand empty because there are no buyers. Yet as an example of how fickle housing policies can be, residents also noted that Homex had been given the go-ahead to build when Mr Peña was governor of the state in which the town lies.

 

Mark Levy, the boss of Urbi, runs through numerous policy changes in recent years that have sideswiped the industry. Some of these are sensible, such as providing classes to teach homebuyers their rights. But some have been introduced with scarcely any warning, causing a sharp financial jolt. The biggest has been Mr Peña’s tilt towards vertical housing, Mr Levy says. Whereas Urbi can finish and sell a single home in 30 days, an apartment block can tie up working capital for a year, which has added to the firm’s debt woes.

 

He said Urbi was “very close” to a standstill agreement with creditor banks on the company’s debt of around 20 billion pesos ($1.6 billion). Homex has raised 4 billion pesos by selling two of its prisons to a consortium part-owned by Carlos Slim, a telecoms magnate. Industry insiders say private-equity firms are hovering over the construction firms, partly because of the potential demand for new homes in Mexico, estimated at about 11m over the next 20 years.

 

However, it is unclear whether homebuyers can be convinced of the attractions of high-rise city living. Urbi says that a big selling-point for blocks of flats is security, an important factor given the crime wave in Mexico. But many people still prefer to live in houses. In Parque San Mateo, Patricia Nova, a mother of two, says the bucolic hacienda next door compensates for the ugliness of the estate’s concrete. And the remoteness has its positive side: at least it’s “better than living with the mother-in-law”, she says.

 

http://media.economist.com/sites/default/files/imagecache/290-width/images/2013/05/articles/body/20130601_WBC680.png

 

[PlanMaestro]

http://blogs.ft.com/beyond-brics/2013/06/06/mexicos-geo-gets-some-breathing-space/#axzz2VCs2nveR

 

http://blogs.ft.com/beyond-brics/2013/05/31/mexican-homebuilders-a-cautionary-tale-for-em-bond-investors/#axzz2VCs2nveR

[PlanMaestro]

http://www.cnnexpansion.com/negocios/2006/01/01/homex-anuncia-nuevo-incumplimiento

[stahleyp]

This one hit another all time low again today.

[LC]

Wow, revenue drops over 80pct. That does not seem like a characteristic of a stable business...I think I'm taking this off my watch list.

[king888]

New 6-K.  Bankruptcy plan filed .

 

http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9954138-899-19991&type=sect&TabIndex=2&companyid=638626&ppu=%252fdefault.aspx%253fsym%253dHXM

 

Existing shareholders will get 7.5%-22.5% of the new entity.

This is good deal for equity shareholder ,IMO .