LatinFinance - September/October 2013 - 54

growth than on capital structure,” says Vertiz. He adds that it is not the government’s
responsibility to bail out companies, but to
develop and improve housing standards.
other, smaller local players were able to
manage the situation better, he says.
Vertiz cites Javer as an example of a
conservative homebuilder, and one that put
a higher priority on free cash flow than on
growth. although Javer grew modestly — or
even contracted some years, it maintained
neutral to positive cash flow, Vertiz says.
“it is possible to have a balanced operation and have the right target and manage
capital needs on a regular basis,” he says.
consorcio aRa has also been conservative in its balance sheet.
Official lifeline
Yet, given the sector’s social importance,
mexico’s government has stepped in,
helping increase lending to homebuilders
through a guarantee program.
in march, mexico’s mortgage regulator
and lender Sociedad Hipotecaria federal
(SHf) announced a 15 billion peso ($1.17
billion) guarantee program to cover projects
and other spending. Homebuilders could
take out loans from commercial banks with
a 30% government guarantee.
as the industry’s biggest companies cut
building and looked at their refinancing
options, the program was designed to keep
construction going.
the loans were for homebuilders developing in line with the government’s new
housing policy — prioritizing apartment
developments close to urban centers.
Homex was the first homebuilder to use the
guarantee scheme, taking a bridge loan to
finance apartment building.
in addition to the guarantees, SHf is
offering 5 billion peso, eight-year syndicated
credit lines to help finance 50,000 homes.
“according to the latest data from the government, the number of homes being built
dropped to 31% as of June, which is a clear
indicator for the government about the
problems that may result from not having
enough housing to meet demand and meet
their goals,” Homex says.
the government will also guarantee bond
sales of up to 5 billion pesos, making deals
better rated and better able to attract investors such as pension funds and insurance
companies.
So far, none have issued under the program. and the financial support may not
help the three defaulted homebuilders. the
assistance is designed to support smaller

54 l atinfina nce.com - September/October 2013

WORK IN PROGRESS: Mexico’s biggest
homebuilders have struggled to adjust to a
new government housing policy

firms, say skeptics — and the support in any
event is not enough to cover the refinancing needs of the big three homebuilders.
the financing program is small in relation to the scale of the problem. the three
biggest homebuilders owe around 55
billion pesos.
Standard & Poor’s says commercial
banks are cutting their exposure to homebuilders, and financing to the industry is
likely to shrink further during 2013 and
2014. Homex, however, says it continues to
have a “positive relationship” with commercial banks which, in turn, rely on the

firm to revive projects.
Some analysts say Homex has the highest chances of the three defaulted companies of recovering, because it is less levered
and has a less complex balance sheet.
“the current administration is aware
of the importance of the problems that all
industry players are facing,” says Homex.
“We are working together to create the
synergies necessary for compliance with
the housing goals of the current administration, where it requires the support and
participation of all parts.”
as mexico’s homebuilders plan out their
restructurings, they will have to rethink
their capital structures.
“from what we can tell, the government
is sitting down with the companies and the
banks to encourage lending to the sector
specifically the troubled ones,” says the
analyst who asked not to be named. “they
will need to restructure and restart their
business on a smaller scale, which is not
necessarily bad, but should be cash flow
positive.” LF

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