MEXICO CITY Shares in Mexico's biggest homebuilders tumbled on Friday as Geo warned it will not be able to make interest payments on local debt and Homex reported weak first-quarter results.
Geo (GEOB.MX), Homex (HOMEX.MX) and Urbi (URBI.MX) are struggling after taking on heavy debt to build suburban developments that have fallen out of favor with Mexicans, who are increasingly buying older homes closer to city centers.
Geo swung to a loss in the first quarter, hit by a fall in house sales and rising financing costs. It said on Friday it will not be able to make interest payments on certain local debt.
Barclays analyst Autumn Graham said the bank expected the company's bonds to face more pressure due to its results and that the need to restructure debt had become clearer.
"We think there is a better chance that Geo presents an offer below where bonds closed, than above," Graham wrote in a research note. "Geo's quarterly financial expenses are higher than its cash position as of (the first quarter), and we do not think Geo can keep operating without some liquidity relief."
Geo stock fell by more than 25 percent on Friday morning. Earlier this month, the company said it had hired advisers to help restructure its debt.
Shares of other homebuilders were also hit hard, with Homex sliding by nearly one-third at one point, a day after the company said first-quarter profit fell 87 percent. Homex pared losses to be down about 25 percent.
Urbi fell by as much as 14 percent in early trading, then recovered to trade down about 6.7 percent.
(Reporting by Elinor Comlay; Editing by John Wallace and Jeffrey Benkoe)