Posadas checks out of restructuring talks

Posadas checks out of restructuring talks

Corporate & Sovereign Strategy Bonds Debt Fixed Income Funds Mexico United States Asset Management Coronavirus

Mexican hotel operator Grupo Posadas has ended discussions with Rothschild & Co because the financial advisory firm no longer represents a "meaningful counterparty" in debt restructuring talks, a source close to the talks told LatinFinance.

When Posadas initiated talks to restructure its 7.875% 2022 bonds in June 2020, Rothschild said it represented an ad-hoc group that held almost 40% of the outstanding notes. Since then, bondholders have either left the group or sold the notes, and Rothschild now represents holders of less than 25%, the source said.

"Negotiations to date had been amicable and frequent," the source said in an email. "Unfortunately, Rothschild hasn't accomplished its objective of facilitating a formal negotiation process up to this point."

Posadas shared a lot of financial information with Rothschild over several months, looking to find a solution to the debt situation, but the smaller holdings of the ad-hoc group defeated the purpose of the talks, the source said. As a result, Posadas has ended its agreement with Rothschild, she added.

"Importantly, the company remains committed to an amicable, consensual negotiation process with its bondholders," the source said.

In July last year, as Posadas held regular discussions with Rothschild, Moody's said in a report that bondholders risked incurring losses of 35% to 65%.

Posadas missed a $15.5 million coupon payment on the 2022 bonds near the end of June last year. The company was expected at the time to ask for bondholders to accept a significant discount on the bonds as it tried to hold on to cash during the COVID-19 pandemic. It missed another $15.5 million payment in December.

Travel restrictions and social distancing measures during the COVID-19 pandemic led to a sharp drop in Posadas' earnings in 2020. At the end of last year, hotels in five states could not exceed 25% capacity and restaurants could not offer indoor dining, while hotels and restaurants in other states could operate up to 75% capacity, depending on the state, according to Posadas.

The company first issued $350 million in the 7.875% 2022 notes at par in June 2015 and added $50 million at 8% in May 2016. It had MXN573 million ($27.5 million) in cash on hand at the end of September last year, down from MXN1.62 billion at the same time in 2019.

DD3 Capital Partners is Posadas' financial adviser on the debt restructuring, while Ritch Mueller and Cleary Gottlieb are the legal advisers.