Cydsa bondholders take 60%

Mexican industrial group Cydsa (BMV: CYDSASA), which offers wastewater and environmental management and services, is to transfer 60% of its share capital to holders of Cydsa notes with a nominal value of US$159mn, according to a press release by bondholder Fintech Advisory. "This is a major recapitalization of Cydsa, which eliminates unsustainable debt and gives creditors the majority of the equity right away. This restructuring encompasses the liquidation of all unprofitable operations, the sale of many additional assets, the elimination of most corporate overheads and the appointment of a new board, with broader business experience and greater independence," said David Martínez of Fintech Advisory in London. Cydsa debt is estimated to be over US$400mn. In addition to the transfer of share capital - a mix of voting and non-voting stock - the transaction also includes US$25.5mn in principal amount of convertible floating rate notes due May 1, 2007, which will convert into up to an additional 20% of the company share capital if the payment deadline is not met. This will be the first time that international bondholders have obtained majority ownership of a company listed on the Mexican stock market as part of a debt restructuring. Fintech organized holders of Cydsa's euro medium-term notes into a consortium to accelerate debt repayment. Tomas González Sada, chairman and representative of the controlling shareholders, has agreed to support the restructuring. He will remain as chairman and CEO. The restructuring has been approved by the board and is expected to be completed during the third quarter of 2004. In March, Cydsa extended principal payments on US$193mn of company debt, establishing escalating principal amortizations from March 2004 to 2011 with creditors Banco Nacional de México, Citibank, BBVA Bancomer, California Commerce Bank and Comerica Bank. The Cydsa industrial group produces textiles, chemicals, petrochemicals and plastics, and offers wastewater and environmental management and services. It sold its packaging unit Película Impresa y Laminada in May to repay debt.