UPDATE 2-Britain fines Pfizer record $107 mln for huge drug price hike
* Drugmakers dispute decision and plan to appeal (Adds Flynn reaction, more on generic drug price controversy)
MONTERREY, Mexico Struggling with slowing home sales and a lack of liquidity, Mexico's top three homebuilders may have to seek bankruptcy protection if they fail to reach an agreement with creditors in the short term.
Home sales at Geo (GEOB.MX), Urbi (URBI.MX) and Homex (HOMEX.MX) plummeted in the first quarter, exacerbating the companies' long-running cash shortfalls and, in some cases, leading them to miss payments on debt and derivatives.
Analysts are skeptical that restructuring efforts will work, arguing that at least in the cases of Geo and Urbi, the companies will likely have to rely on protection under Mexico's version of U.S. Chapter 11, known as Concurso Mercantil.
"The homebuilders have a very heavy debt load ... about 20 (percent) to 30 percent of their total debt, mostly bank debt, is due in the next 18 months," said Marco Medina, an analyst at Ve por Mas. "They need a quick fix. They have limited time."
An Urbi spokesman said the company is not planning to file for bankruptcy, and was instead working to recalibrate its debt.
Nonetheless, Urbi failed to pay 3.9 million pesos ($320,800) in interest due last month, a development that ratings agency Moody's said could herald the beginning of the company's inability to meet all outstanding payments.
Urbi already faces lawsuits seeking over $100 million in damages in the United States and Mexico over debt and bank derivative payments.
Officials for Geo and Homex declined to comment.
RACE AGAINST TIME
Urbi, Mexico's third-largest homebuilder, closed out 2012 with a total debt burden of 20.1 billion pesos ($1.64 billion) and only 116 million pesos in cash - a figure analysts suggest will prevent the company from paying bills coming due.
Geo, too, is in trouble, having failed last month to meet interest payments on its local debt, potentially triggering a broader default on the 400 million pesos in principal it owes.
On Monday, Geo's creditors agreed to a stay of execution until the company finalizes its restructuring process.
Geo had about 13.808 billion pesos in debt at the end of March and only about 371 million pesos in cash.
Both companies have now been roundly downgraded by ratings agencies, crimping their access to new lines of credit in an industry that requires high levels of capital expenditure.
Homex is in a better situation after selling its stake in prison-building projects for 4 billion pesos, but this has not stopped Credit Suisse and Barclays from suing the company in New York courts for missed payments related to derivative positions.
To be sure, some analysts and investors believe the homebuilders could restructure their debt because they have assets to sell and the sector's fundamentals remain solid.
In the past week, Geo and Urbi shares have recovered slightly, although for the year to date, Geo shares are down more than 60 percent, while Urbi is down more than 70 percent.
"The homebuilders have the capacity and assets to back a debt restructuring. They just need time," said Carlos Hermosillo, an analyst at Banorte-Ixe. "It won't be easy, though, there is a significant chance they may have to resort to bankruptcy protection."
The companies' results have been squeezed in the last two years by a change in housing policy after they overspent on big out-of-town developments where Mexicans no longer want to live.
Mexico's government is expected to announce soon new rules for subsidies and loans that will give the sector more certainty - in a country with a housing deficit of about 9 million units and growing demand for about 600,000 new homes a year.
(Reporting by Gabriela Lopez; Writing by Gabriel Stargardter and Elinor Comlay; Editing by Jan Paschal)
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