Speculation mounts that Satmex will file for bankruptcy locally

Mexican satellite company Satmex is likely to file for bankruptcy under Mexican legislation, being free to do so as of July 28, according to local daily Reforma. US creditors and Satmex controlling shareholder Sergio Autrey agreed two weeks ago to extend until July 7 from June 15 the deadline for resolving differences over whether to file for bankruptcy in the US or Mexico. But on condition that Satmex would not file for bankruptcy protection under Mexican law, a Concurso Mercantil, before June 28. There has been growing speculation that the Mexican government is pressuring Autrey to request a Concurso Mercantil. The Mexican government holds a US$188mn note for a loan it made to Firmamento, a holding company controlled by Autrey, when Satmex was privatized in 1997. Mexican newspapers have surmised that the government fears its loan would be treated as shareholder debt rather than Satmex debt if the restructuring takes place under US laws. Stoking the fire is a report this week from international news service Debtwire that the government cancelled a meeting with Satmex creditors last week. "The meeting was cancelled because the government refused to speak with us," one creditor was reported as saying. This meant Autrey also failed to meet with creditors last week, and there are no meetings planned in the near future, sources close to the situation told Debtwire. According to BCP Securities analyst James Harper there are three possible outcomes to the current scenario: to reach a deal before July 7; to not reach a deal and file a concurso mercantil; or for creditors to ask for a further extension of the July 7 deadline. "I don't think they are going to reach a deal. So I do think it will be a concurso mercantil or a second extension," Harper told BNamericas. Creditors will definitely react negatively to the former, Harper said, adding that sorting through a bankruptcy deal in Mexico could take years. Reforma also downplayed rumors over recent days that American satellite operators PanAmsat (NYSE: PA), Intelsat and SES Americom were interested in injecting capital into the flailing Satmex. It is unlikely such investment would be forthcoming before the company restructures its debt, Reforma said, citing sources close to the creditors. Satmex has been in default on US$523mn since 2003. Creditors representing at least US$379mn of debt in default filed an involuntary chapter 11 petition in a New York court at the end of May.