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MEXICO CITY, May 10 (Reuters) - A Mexican bankruptcy court said
on Wednesday it will let the country's No. 2 sugar producer Grupo
Azucarero Mexico (GAM) suspend repayment of almost $126 million
dollars to give it time to reschedule debts.
``Suspension of payment has been allowed. The verdict was given
yesterday and will be published today,'' bankruptcy court Judge
Justino Montes de Oca told Reuters.
The company said in a statement the debts involved amounted to
approximately $125.9 million and the suspension was part of a
general capital restructuring.
``GAM is analysing various options and will do all it can to
achieve a comprehensive financial restructuring as soon as
possible,'' it said.
GAM said the suspension would allow it to maintain normal
operations. Company officials did not answer requests for further
information.
Under Mexican bankruptcy and suspension of payments law, firms
can seek protection from creditors if they have difficulty paying
debts. The judge noted that GAM has the funds but needs time to
reschedule payments.
The judge said company debts were more than 2.0 billion pesos
($208 million), while assets were more than 3.0 billion ($313
million). He did not break down the debt by due dates.
Ratings agency Standard and Poor's said in a statement the firm's
next interest payment was scheduled for July 15. It cut GAM's local
and foreign corporate credit ratings to 'D' from single 'B-minus'
after the debt suspension.
Judge Montes de Oca said the firm had been adversely affected by
low domestic sugar prices, caused by slack demand and abundant
supply.
``The sugar industry in our country is immersed in a severe
crisis that has worsened in the last few months,'' GAM said.
GAM added that domestic prices have dropped more than 22 percent
in real terms over the last three years and are now less than
production costs.
``The company's financial profile has continued to deteriorate in
the past few months in line with weaker domestic sugar prices,''
said Standard and Poors.
Trade in the company's shares was stopped at 0820 (1320 GMT) on
Wednesday, Mexico's stock exchange said in a statement. The stock
has not traded since Jan. 10, when it closed at 1.8 pesos (19
cents).
GAM Director General Carmen Arreola said in a February interview
the firm's long-term debts amounted to $116 million.
She added that Mexico's heavily-indebted sugar industry needs
swift refinancing and a more orderly internal market to avoid
bankruptcies.
A credit and liquidity boost was essential for a business which
produces for only six months of the year, she said.
GAM, which has five mills located in the east and west of the
country, is expected to produce 453,000 tonnes of sugar this year,
down from 469,000 tonnes in the previous cycle.
Mexico, the eighth largest sugar producer in the world, is seen
producing 4.8 million tonnes of sugar this year, from 4.7 million
tonnes in the cycle ended July 20, 1999. The bulk of this -- 4.2
million tonnes -- is consumed internally.
($1 equals 9.60 pesos)
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