OHL bonds tumble on Mexico concerns
By Robert Smith
LONDON, May 7 (IFR) - Obrascon Huarte Lain's high-yield bonds slumped on Thursday, after the release of recordings that appeared to show executives at the Spanish builder's Mexican unit discussing overcharging the government.
OHL's most recent issue, a EUR325m 5.5% 2023 note, fell from a bid of 96.60 to 93.10, according to Tradeweb prices.
These notes were issued at 93.866 in March but traded up as high as 99.60 in April. The bond's global coordinators were forced to price the deal at this deep discount as they underwrote it at lower yields than the market would accept, costing them up to EUR20m.
Shares of OHL Mexico fell nearly 12% on Wednesday, while OHL's shares fell as much as 8% on Thursday morning. OHL described the recordings as "espionage" and said in a statement the voices had been edited, taking comments out of context and distorting what they were saying.
A sharp fall in OHL Mexico's shares is particularly worrying for debt investors as it could put pressure on margin loans. OHL Concesiones agreed a EUR300m-equivalent three-year margin loan in Mexican pesos in September 2013, providing its 24.25% stake in OHL Mexico as collateral.
"I think the loan's still in the money but it depends on where OHL Mexico's shares open," said an investor. "Its market cap is still EUR2.7bn, so a 24.25% stake should be worth around EUR650m against a EUR300m margin loan." (Reporting by Robert Smith, editing by Helene Durand, Julian Baker)
© Thomson Reuters 2017 All rights reserved.