(Forbes.com posted the following Reuters article on January 27.)
MEXICO CITY — Mexico’s TMM, which runs the country’s largest railroad and is in danger of defaulting on $177 million in debt due in May this year, said on Monday it will meet with bondholders on Tuesday to seek their consent on a debt swap.
TMM, whose full name is Grupo Transportacion Maritima Mexicana, wants to exchange the bonds due this May plus an additional $200 million in bonds due 2006 for newly-issued debt due 2010.
As of the end of September, TMM’s net debt was $981 million.
Monica Azar, manager of investor relations at TMM
Fitch and Moody’s debt-rating agencies have said that if TMM does not manage a debt exchange or to sell assets it is considered likely to default on the May 2003 bonds because it has low cash balances and does not generate significant free cash flow.
TMM offers maritime shipping services, logistics operations and port operations in Mexico, and rail transport between Mexico and the United States.
TMM is 36.9 percent owned by railroad company Kansas City Southern (nyse: KSU – news – people). TMM owns a 41 percent stake in Grupo Transportacion Ferroviaria Mexicana (TFM), which carries some 40 percent of Mexico’s rail traffic.
TMM took on heaps of debt in the late 1990s, when trade was booming with the United States and financing was easy. With both the U.S. and Mexican economies struggling to emerge from recession, trade is flagging and financing has dried up.