Aeroméxico experienced a very black day on the Mexican Stock Exchange. The shares of the Mexican airline sank this Thursday reaching a low of 90 cents per share, which was a fall of 75% compared to the previous day. The historic collapse of the company in the stock market occurred hours after the announcement that a company not related to the company will initiate procedures to carry out a voluntary takeover bid (OPA) of shares. At the close of the trading day, the price of the company’s shares recovered slightly to end at 1.79 pesos per share, 51.4% less than the price of 3.69 pesos per share at which it traded on Wednesday.
As part of its financial restructuring process, Aeroméxico announced through a statement that the public offering will be made at one peso per cent for each of the outstanding shares. The offer will be made for 331 million shares, which is equivalent to 49% of the company’s current capital and the securities owned by Delta Airlines will not be part of the OPA. The company emphasized that this measure is conducive “to the conclusion of the voluntary restructuring process of the Company under Chapter 11” of a court in New York. Since the middle of last year, the company has filed for the United States Bankruptcy Law to fight bankruptcy after the economic crisis derived from the pandemic.
Brian Rodríguez, an analyst at Grupo Financiero Monex, explains that the stock’s collapse was due to the low valuation that the same company makes by setting a price of one cent per share, that is, it came out at a auction price. “The valuation made by this new company and the valuation of the company on itself is to give it a value very close to zero, why? Well, we must remember that Aeroméxico is under the Bankruptcy Law in the United States because there is a Weak financial culture and it has liabilities that are 1.5 times its assets and it has debts that it has not been able to pay off, ”he says.
The financial specialist points out that Aeroméxico’s flow capacity is almost nil given the high expenses it has, far from decreasing its leverage it continues to increase. “A penny of a peso per share is offered for investors to take this capital in exchange for the fact that this new company is also going to inject more money, it is going to capitalize these liabilities, measures that will allow the future operation of the company”, Rodríguez complemented.
The group of Mexican shareholders will have a 4.1% stake in the airline’s capital stock, while Apollo will hold 22.3% of the shares and Delta Airlines – which, until before the Aeroméxico restructuring, had a 49% stake – will keep 20%. “The rest [será] distributed among all new investors and creditors who capitalize their recognized credits in shares representing the future capital stock of Aeroméxico ”, the airline specified in a statement.
Like other airlines in the world, the Mexican airline was hard hit by the drop in demand due to the coronavirus crisis. In July 2020, the company voluntarily joined Chapter 11 of the United States Bankruptcy Law and received a $ 1 billion loan from the Apollo Global Management investment fund. After months of negotiations, last November he presented a new restructuring plan that was a bottle of oxygen for the company.
Although operationally Aeroméxico has already shown signs of improvement in passenger flow, compared to last year, it is still going through a financial crisis. As of the third quarter of 2020, the company reported a net loss of 2,244 million pesos and income in that period for 13,234 million pesos, 28% below the income reported in 2019, prior to the pandemic. For industry analysts, the collapse of the company’s shares is not a surprise, it is another sign of the critical situation facing the airline.
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George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.