Negotiations to finance Mexican steelmaker Ahmsa could include acquisition

Negotiations to capitalize financially troubled steel company Altos Hornos de México (Ahmsa) are advancing and could even involve the acquisition of the firm.

Talks with investors continue, even though a regional court recently ordered the company to initiate bankruptcy proceedings and it is facing a workers' strike to review the collective employment contract.

At the end of January, Ahmsa confirmed to BNamericas that negotiations were underway, but provided no further details, after President Andrés Manuel López Obrador proposed that the owner of the steel company, Alonso Ancira, sell his shares to Mexican businesspeople and present a debt repayment plan in exchange for government support.

"There is a very advanced multilateral negotiation process to form an association or carry out an acquisition of the company by interested groups," Ahmsa spokesperson Francisco Orduña told BNamericas on Wednesday when asked about the issue.

Orduña added that the reason for the negotiations is that "Ahmsa, after paying the second installment of the agreement that the government imposed on it through Pemex (US$200mn and the second installment of US$54mn) was left without working capital, because the government itself canceled the operating loans that were held with Pemex and [state power utility] CFE."

The steelmaker had already made a first payment of US$52mn in November 2021 as part of the repayment agreement, under which it was obliged to pay US$216mn that Pemex was ruled to have overpaid in 2014 for the steelmaker's fertilizer subsidiary, Agronitrogenados, the spokesman said.

The steelmaker, which is based in Coahuila state, has also suffered cuts to power supply by CFE that have affected its operations and halted steel production for more than a month.

In January, its subsidiary Minera del Norte (Minosa) reported that it had to file for bankruptcy protection under current Mexican law, which implied the suspension of payments, although the company assured then that iron and coal mining operations continued as normal and the decision did not affect Ahmsa.

New bankruptcy process

Last week, Coahuila state media reported that a civil court in Monclova decided, at the request of an interested creditor, to initiate a bankruptcy conversion process against Ahmsa for alleged non-payment of liabilities agreed in 2016 to conclude a previous suspension of payments that was initiated under a bankruptcy law prior to the current one.

This previous bankruptcy conversion process dated back to 1999, when Ahmsa restructured its debt as a consequence of the collapse of international steel prices and the global financial crisis, the company states on its website.

Judge Mónica Rodríguez also told Ahmsa that she would allow the Mexican iron and steel industry chamber, Canacero, to appoint the trustee for the new process.

However, Canacero spokesperson Isidoro Guerson told BNamericas that "the national iron and steel industry chamber has not been notified by any judge of any jurisdiction or instance to exercise the duties of trustee."

"The decisions of Canacero, especially one as important as the one at hand, are made by consensus of the executive committee of the chamber, executive body and at the decision of the institution," said Guerson, adding that it will make public any decision on the matter at the appropriate time.

BNamericas separately confirmed the decision of the aforementioned civil court to begin bankruptcy proceedings for Ahmsa, in addition to the previous ones.

To make matters worse for the company, in the midst of the talks with potential investors and a new bankruptcy process, Torreón newspaper El Siglo reported on Wednesday that section 147 of the democratic mining union called a strike at Ahmsa Plant 1 to review the collective employment contract, while section 288 has formed a committee to will do the same for Plant 2.

Some 17,000 jobs in the city of Monclova depend on these two plants. The legal process the Monclova civil court "is not going to close the company," Gerardo Flores Escobedo, spokesperson for the mining union, was cited as saying by the daily, adding that the union's duty is to "look out for the workers."

Calling a strike is a routine legal act that the union performs each year to begin the wage negotiation process, as well as every two years to review the collective contract itself.

Grupo Acerero del Norte has a 64% shareholding in Ahmsa, while the investing public owns 34% of the stock and the board members and directors have 2%, according to corporate information.