Altos Hornos de México falls into bankruptcy after failing to forge agreement

Mexican steelmaker Altos Hornos de México (Ahmsa) announced that it will enter bankruptcy after failing to reach an agreement with creditors, although it continues to work to attract investors to capitalize the company.

A second 90-day extension period to negotiate with creditors to end the bankruptcy proceedings came to an end on August 4 without sufficient agreements being hammered out on the sums owed by the firm.

The company, facing debts estimated at over US$1 billion that forced it into insolvency proceedings, required all creditors to sign the agreement before that date, which would enable its capitalization and subsequent resumption of commercial activities, which have been gradually suspended since late 2022. 

"After concluding the last extension of the conciliation stage in its insolvency proceedings, Altos Hornos de México will enter the bankruptcy phase, the declaration of which will be issued at any time by the head of the second district court, Ruth Haggi Huerta," the firm said in a note sent to the Mexican stock exchange (BMV).

In this new phase, the federal institute of bankruptcy specialists (Ifecom) will appoint a trustee who will take control of the company.

Ahmsa reported that the current administration, supported by its financial advisor Rothschild & Co and under the supervision of conciliator Victor Aguilera, is actively seeking to attract both national and foreign groups interested in capitalizing the company, with the aim of resuming operations as soon as possible.

“Talks are ongoing with seven potential investors and steel companies, two of which have already conducted due diligence visits, and more are expected in the coming weeks to assess the status of the assets and determine the viability of the operation,” the company's statement read.

The steelmaker added that if an agreement can be reached in the coming months, there will be a chance of restarting operations and preserving jobs in Coahuila state.

State and national union leaders have warned that the worst-case scenario for Ahmsa workers is for the company's assets to be split up and sold off piecemeal, which often happens after bankruptcy declarations.

In July last year, US fund Argentem Creek pledged to inject US$200 million to reactivate the operations of the steel company but Ahmsa never received the money.

Last month, Ahmsa reported that it was continuing to work to implement the agreement with an investor who initially submitted a financing proposal pending the resolution of tax credits imposed by tax authority SAT and other contingencies, although it did not state the investor's name.

Capital Analysts' director of securities and operations, Raymundo Díaz, told BNamericas recently that Ahmsa would require at least US$2bn to cover its financial obligations to creditors, pay debts to the government and reactivate plant 1.

Meanwhile, Napoleón Gómez Urrutia, head of the national union of mining, metallurgical, steel and related workers, warned that the collapse of Ahmsa is a huge challenge for the incoming government of president-elect Claudia Sheinbaum, since nearly 20,000 workers, many of them highly specialized, depend directly on the steelmaker and its associated mines.

“Most of the Ahmsa workers stayed with the union, which had one of the best collective bargaining agreements. Unfortunately, they're going to lose it. Our legal department will fight to prioritize labor rights in this process, but the reality is that the bankruptcy judge will decide how the company's assets are distributed based on what's available,” Gómez, who is also a senator for the ruling Morena party, was quoted as saying by newspaper La Jornada.