Government of Mexico offers to restructure AHMSA's debt

Wednesday, 17 May 2023 23:04:49 (GMT+3)   |   San Diego

President Andres Manuel Lopez Obrador said this week that he proposed to the paralyzed steel company Altos Hornos de México (AHMSA) to restructure the debt with the federal government that exceeds $170 million.

“If there is participation of new investors and they need time to pay us, we can make a plan. Schedule these payments and regularize this situation with the government (...) We are waiting for the response (from AHMSA), thinking about the workers so that they are not fired,” the president said yesterday in his morning conference from the National Palace in Mexico City.

The productive paralysis of AHMSA, on which 10,000 families depend economically, a figure that rises to 70,000 considering indirect jobs. In the Monclova region, where the steel company is installed, the region's economy is reportedly “semi-paralyzed.”

López Obrador's words were made after his cousin, the Minister of the Interior, Adan Augusto Lopez, was in Monclova on Saturday and confirmed the social crisis that is being experienced due to the lack of payment of wages and salaries.

AHMSA has been the target of attacks since the current federal government began (December 2018) for the alleged financing of the political party that was in power in the previous six-year term and currently governs Coahuila.

In May 2019, the fifth month of the Lopez Obrador government, the main shareholder of AHMSA, Alonso Ancira, was arrested in Spain accused of patrimonial damage to the state oil company Pemex in 2014 for the sale of a fertilizer plant.

To get out of jail, Ancira signed an agreement for AHMSA to compensate Pemex with $216.7 million, a payment divided into three installments. The first payment was in November 2021 for $50 million, the second payment was in November 2022 for $54.2 million.

Those payments for $104.2 million generated a liquidity crisis in AHMSA and it defaulted on payments for electricity and gas consumption. Thus, the CFE and Pemex suspended the supply of energy and at the beginning of 2023, the steel company was paralyzed and stopped producing steel.

A month later, in February 2023, Ancira agreed to sell control of AHMSA to the American Argentem Creek Partners, a company that will inject $200 million in working capital to reactivate production.

Argentem requested among the requirements to complete the purchase of AHMSA, that the federal government agree to defer for nine months the third payment of compensation to Pemex for $112.5 million to be paid in August 2024.

The restructuring of the debt to the federal government that the president announced yesterday was proposed by Argentem since March, for which some market specialists believe that with these positions, AHMSA will restart operations.

AHMSA, the president said: "It has a great future for the North American market" (USMCA), for which it publicly agreed to restructure "the debt ranges between MXN 3000 million and MXN 5000 million" (about $170 million and $280 million) with the federal government for taxes, consumption of electricity, gas, social security contributions, among others.

If the federal government fulfills his promise, Argentem Creek Partners may have international financing for AHMSA for the steel company, which has an annual production capacity of 5.5 million metric tons of steel.

AHMSA, like state oil company Pemex, is technically bankrupt because their liabilities exceed the value of all their assets. As of September 2022 (the most recent public data), total assets (at today's exchange rates) were $2.40 billion and total liabilities $3.10 billion. The technical bankruptcy is $702 million.

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