Key Takeaways
- We expect low refinancing risk for Mexican corporate entities in the near term, as investment-grade rated companies face most of the upcoming maturities.
- Despite higher borrowing costs than in 2021, we do not expect significant changes in corporate interest coverage ratios after refinancings.
- We see a significant rise in domestic-currency debt as a share of total debt to further improve corporate capital structures, while interest rates decrease, and to avoid the volatility in foreign-exchange denominated debt.
- We forecast a lower likelihood of additional debt for capital expenditure (capex), as growth investments were performed in the past couple of years while the potential tightening in financial conditions increases the downside risk in forecasted growth due to trade-related uncertainty.
Data Approach
For our analysis, we consider a sample of Mexican corporate entities with public debt in the domestic and/or foreign bond market, with information as of Sept. 30, 2024, from Reuters and the Mexican Stock Exchange (Bolsa Mexicana de Valores). For accuracy purposes, we exclude Petroleos Mexicanos (BBB/Stable/--), as it represents most of the Mexican debt market, and its information could distort the results.
The Mexican Corporate Sector's Capital Structure
About 10% of total corporate debt will mature annually for the next four years, which we view as comfortable.
In our opinion, most of the corporate sector faces low short-term maturity pressures due to active refinancings in the last 12 months, which have further improved the companies' liquidity positions. Furthermore, the companies' share of bank debt has remained steady, demonstrating higher accessibility to financial markets. Such debt averaged 20% of total debt as of Sept. 30, 2024, and we expect this will remain the case in the medium term.
Chart 1
We expect refinancing risk to be low.
This is because only 10% of total corporate debt will mature annually for the next four years, most of the 2025 maturities will be among investment-grade rated corporations, and we expect solid access to financial markets. Debt refinancings totaled more than $15 billion in the first nine months of 2024, which will support comfortable maturities for at least five more years.
Investment-grade rated America Movil S.A.B. de C.V. (A-/Stable/--) and Grupo Bimbo S.A.B. de C.V. (BBB+/Stable/--) will account for 41% (35% and 6%, respectively) of the 2025 debt maturities.
Chart 2
In addition, other entities with upcoming maturities are AC Bebidas, S. de R.L. de C.V. (mxAAA/Stable/--), Arca Continental S.A.B. de C.V. (mxAA/Stable/--), Sigma Alimentos S.A. de C.V. (BBB-/Watch Pos/--), and Cemex S.A.B. de C.V. (BBB-/Stable/--).
Our capex estimates indicate the low probability of additional debt in 2025.
Most of the upcoming corporate refinancings will be in the telecoms, beverage, bottling, food processing, retail, chemicals, and building materials industries, which have usually high capex. However, we believe that most companies in these sectors have deployed growth capex in the past two years, so we do not expect additional debt-funded capex in the next 12 months. In addition, we believe current trade-related uncertainty could dampen the Mexican companies' growth investment prospects.
Conditions For Upcoming Refinancings
We expect stable interest coverage ratios for the next 24 months, despite the likely higher borrowing costs than in 2021.
Based on data on Latin American corporations that have accessed the bond market in 2024, the yield reference rates have reached between 4.0% and 5.5% for investment-grade rated issuers. For those in the 'BB' rating level, rates were 5.5%-10.0%, and 10%-15% for those at the 'B' level. These levels could suggest an increase of about 20% in interest expenses for most companies for the next two years, compared with their current costs, as debt was issued amid a low-rate environment back then. But we do not expect significant deviations in interest coverage ratios for the next two years. This is because we expect interest rates to continue declining, and corporations to increase their EBITDA, increasing tolerance for borrowing costs.
Chart 3
Further rate cuts will support upcoming refinancings but remain significantly above 2021 levels.
Our expectation is that the federal funds rate could reach 3.5% and the benchmark interest rate in Mexico to reach 8.5% by 2025. We believe the expected rate cuts will improve refinancing conditions for Mexican corporations, although these rates will still be above those for which these instruments were issued.
Chart 4
We believe some corporations will choose to reduce the foreign-exchange rate exposure on their debt to further improve capital structures.
We believe some Mexican entities will increase the share of domestic-currency debt while interest rates continue decreasing in the next couple years. Evidence of this is that the peso-denominated instruments accounted for about 45% of total debt in 2024, up from 28% in 2018. This is because Mexican companies used to benefit from higher access to debt markets and better financing conditions in foreign markets. Currently, companies are looking to lower their exposure to foreign-currency debt and maintain higher correlation between revenue generating and the funding currency to further improve borrowing costs.
Chart 5
Chart 6
| The sample of Mexican corporate entities | |||||
|---|---|---|---|---|---|
| Company | Industry | Company | Industry | ||
| 1 |
AC Bebidas, S. de R.L. de C.V. |
Beverage/Bottling | 38 |
Grupo Gicsa S.A.B. de C.V. |
Retail Stores - Other |
| 2 |
Alfa S.A.B. de C.V. |
Conglomerate/Diversified Mfg | 39 |
Grupo Herdez S.A.B. de C.V. |
Food Processors |
| 3 |
Alpek S.A.B. de C.V. |
Chemicals | 40 | Grupo HYCSA | Industrials - Other |
| 4 |
Alsea, S. A. B. de C. V. |
Food Processors | 41 |
Grupo Industrial Saltillo S.A.B. de C.V. |
Vehicle Parts |
| 5 |
America Movil S.A.B. de C.V. |
Telecommunications | 42 |
Kuo S.A.B. de C.V. |
Food Processors |
| 6 |
Arca Continental S.A.B. de C.V. |
Beverage/Bottling | 43 | Grupo Lala SAB de CV | Food Processors |
| 7 | Banamex Fibra Danhos Fideicomiso 17416-3 | Home Builders | 44 |
Grupo Mexico S.A.B. de C.V. |
Railroads |
| 8 | BeGrand S.A.P.I. de C.V. | Home Builders | 45 |
Grupo Minsa S.A.B. de C.V. |
Food Processors |
| 9 |
Becle S.A.B. de C.V. |
Beverage/Bottling | 46 |
Grupo Palacio de Hierro S.A.B. de C.V. |
Retail Stores - Other |
| 10 | Bepensa Bebidas S.A. de C.V. | Beverage/Bottling | 47 |
Grupo Posadas S.A.B. de C.V. |
Lodging |
| 11 | Betterware de Mexico S.A.P.I. de C.V. | Consumer Products | 48 |
Grupo Radio Centro S.A.B. de C.V. |
Service - Other |
| 12 |
Cemex S.A.B. de C.V. |
Building Products | 49 |
Grupo Rotoplas S.A.B. de C.V. |
Building Products |
| 13 |
Coca-Cola Femsa S.A.B. de C.V. |
Beverage/Bottling | 50 |
Grupo Televisa S.A.B. |
Telecommunications |
| 14 | Comercializadora Circulo | Retail Stores - Food/Drug | 51 | Grupo Traxion S.A.B. de C.V. | Service - Other |
| 15 |
Compania Minera Autlan, S.A.B. de C.V. |
Metals/Mining | 52 | Grupo Vasconia S.A.B. | Metals/Mining |
| 16 |
Consorcio ARA S.A.B de C.V. |
Home Builders | 53 | Industrias Bachoco S.A.B. de C.V. | Food Processors |
| 17 |
Controladora Comercial Mexicana, S. A. B. de C. V. |
Retail Stores - Food/Drug | 54 |
Industrias Penoles S.A.B. de C.V. |
Metals/Mining |
| 18 |
Controladora Mabe S.A. de C.V. |
Consumer Products | 55 | Inmuebles Carso SA de CV | Lodging |
| 19 |
Corporacion Interamericana de Entretenimiento S.A.B. de C.V. |
Leisure | 56 |
Kimberly-Clark de Mexico S.A.B. de C.V. |
Consumer Products |
| 20 |
Cydsa S.A.B. de C.V. |
Chemicals | 57 | Lamosa Revestimientos S.A. de C.V. | Building Products |
| 21 |
Desarrollos Hidraulicos de Cancun, , S. A. de C. V. |
Service - Other | 58 | MAC Health S.A.P.I. de C.V. | Health Care Facilities |
| 22 |
El Puerto de Liverpool S.A.B. de C.V. |
Retail Stores - Other | 59 |
Medica Sur S.A. de C.V. |
Health Care Facilities |
| 23 |
Elementia Materiales S.A.B. de C.V. |
Building Products | 60 | Megacable Holdings SAB de CV | Cable/Media |
| 24 |
Ferrocarril Mexicano S.A. de C.V |
Railroads | 61 |
Minera Frisco S.A.B. de C.V. y Subsidiarias |
Metals/Mining |
| 25 |
Fomento Economico Mexicano S.A.B. de C.V. |
Beverage/Bottling | 62 |
Montepio Luz Savinon I.A.P. |
Service - Other |
| 26 |
Fortaleza Materiales S.A.P.I. de C.V. |
Building Products | 63 |
Nemak S.A.B. de C.V. |
Vehicle Parts |
| 27 |
GCC S.A.B. de C.V. |
Building Products | 64 |
Operadora de Sites Mexicanos S.A.B. de C.V. |
Telecommunications |
| 28 |
Genomma Lab Internacional S.A.B. de C.V. |
Chemicals | 65 |
Orbia Advance Corp. S.A.B. de C.V. |
Chemicals |
| 29 |
GMexico Transportes S.A.B. de C.V. |
Railroads | 66 |
Organizacion Soriana S.A.B. de C.V. |
Retail Stores - Food/Drug |
| 30 |
Gruma S.A.B. de C.V. |
Food Processors | 67 |
Petroleos Mexicanos |
Oil and Gas |
| 31 |
Grupo Aeromexico, S.A.P.I. de C.V. |
Airline | 68 | Promotora Empresarial del Norte S.A. de C.V. | Consumer Products |
| 32 |
Grupo Aeroportuario del Centro Norte S.A.B. de C.V. |
Transportation - Other | 69 |
Red de Carreteras de Occidente S.A.P.I. de C.V. |
Transportation - Other |
| 33 |
Grupo Aeroportuario del Pacifico S.A.B. de C.V. |
Transportation - Other | 70 |
Sigma Alimentos S.A. de C.V. |
Food Processors |
| 34 |
Grupo Bimbo S.A.B. de C.V. |
Food Processors | 71 |
Sitios Latinoamerica, S.A.B. de C.V. |
Telecommunications |
| 35 |
Grupo Carso, S. A. B. de C. V. |
Conglomerate/Diversified Mfg | 72 |
Total Play Telecomunicaciones S.A. de C.V. |
Telecommunications |
| 36 |
Grupo Collado S. A. de C. V. |
Metals/Mining | 73 |
Vinte Viviendas Integrales S.A.B. de C.V. |
Home Builders |
| 37 |
Grupo Elektra S.A.B. de C.V. |
Retail Stores - Other | 74 |
Xignux S.A. de C.V. |
Industrials - Other |
This report does not constitute a rating action.
| Primary Credit Analyst: | Humberto Patino, Mexico City + 52 (55) 50814485; humberto.patino@spglobal.com |
| Secondary Contacts: | Fabiola Ortiz, Mexico City + 52 55 5081 4449; fabiola.ortiz@spglobal.com |
| Claudia Sanchez, Mexico City + 52 55 5081 4418; claudia.sanchez@spglobal.com |
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