Groupo Kaltex sees signs of difficulties.
The Mexican textile producer was the subject of a Bloomberg report detailing its recent financial turmoil, including falling bond rates and two failed refinancing attempts. Investors anticipate a default, in which the company will not meet its debt obligations, in the near future.
Kaltex’s requests for comment were not immediately returned.
Kaltex bonds, or corporate loans, have fallen 40 cents since mid-February when investors backed out of its second attempt to refinance its bond payments due that month, according to Bloomberg. The producer had previously attempted to refinance the debt payment in November through an asset sale, which refers to the sale of tangible and intangible parts of a business to pay off debts or mitigate risk from assets.
In early 2021, the company sold its retail store, Milano, for $80 million, followed by its original subsidiary, Revman International, for another $66 million.
As of September 30, Kaltex had $28 million in cash. On April 11, he owes investors $218 million in notes, valued at 60.5 cents on the dollar.
US credit rating agencies Fitch Ratings and S&P Global Ratings both downgraded Kaltex’s score – which measures the likelihood of default or resumed issuance – following news of its latest refinancing attempt. Fitch Ratings expects the next step for the company will be a debt swap, in which bondholders receive 31 to 50 cents on the dollar.
Last February, around the time of the company’s first attempt to refinance, Kaltex announced that it had made “big investments” in sustainable production and more efficient machinery to reduce its water and energy consumption. and increase US exports.
At the height of the Covid-19 pandemic, nearshoring became a leading strategy for companies looking to neighboring countries to fulfill their orders. As one of Mexico’s largest suppliers, Kaltex has benefited from this change and even outperformed others in the market as industry exports have fallen in 2020. Central America – the region bordered by Mexico and Colombia, and home to Panama, Costa Rica, Nicaragua, Honduras, El Salvador, Guatemala and Belize – has become an excellent alternative to Asian sourcing.
Despite demand for more local sourcing, soaring cotton prices could negate the positive. Following the Great Recession in February 2011, cotton prices soared above $2 a pound, a rate experts believe is possible if droughts continue and wars escalate.
Kaltex bonds continue to trade at normal levels as the market waits to see if it will recover.