Mexican Glass Maker Gets Foreign Loan : Finance: Only one U.S. firm is participating in the $126-million Vitro deal.
In the largest new commercial bank loan to a Mexican company since the Third World debt crisis began eight years ago, 16 international banks and an arm of the World Bank agreed Wednesday to lend glass-making giant Vitro $126 million for up to 10 years.
In addition, the International Finance Corp., the World Bank unit that extends credit to private companies, said it will invest $10 million in the company’s stock.
The loan and new stock issue are expected to cover most of the approximately $150-million cost of a new plant that will double Vitro’s production of glass for the automotive, construction and furniture industries. Plant construction in this northeastern Mexican city is scheduled to take two years.
Vitro is Mexico’s largest glass maker, with 1989 revenue of $1.7 billion, and owns Anchor Glass, a major U.S. bottle maker. From its Monterrey plant, Vitro also supplies about 8% of the glass used in the windshields and windows of U.S.-made cars.
Ernesto Martens, Vitro president, said the expansion is needed to keep up with growing demand and would not have been possible without the international loan. Long-term credit is virtually unavailable in Mexico, and interest rates on short-term credit are 35% or more annually after conversion to dollars.
Already among the strongest companies on the Mexican Stock Exchange, the corporation is considered a likely candidate to begin trading on U.S. markets through American Depository Receipts, the equivalent of shares for foreign corporations.
The loan was made to Vitro’s flat-glass production company, Vitro Flotado, which is 35% owned by Pilkington PLC of Britain.
The banks agreed to lend Vitro the money at a favorable interest rate of 2 percentage points over the London Interbank Rate.
The International Finance Corp., or IFC, which organized the loan, will supply $25 million from its own funds. The rest of the borrowed money will come from 15 European banks and First City Texas-Houston.
In the past eight years, U.S. banks have set up reserves and written off billions of dollars in Latin American debt, contributing to large losses. Last year, as part of debt renegotiations under an initiative of U.S. Treasury Secretary Nicholas F. Brady, banks agreed to forgive 35% of the Mexican government’s debts to them.
Since January, Mexico’s government-owned and private companies have sold over $1 billion worth of bonds on world markets. But this summer, John S. Reed, the chairman of Citicorp--Mexico’s largest bank creditor--predicted that it would be a long time before international commercial banks would be willing to lend again to Mexico.
IFC participation in the loan made it more attractive to banks, said an agency official. However, he added that the IFC did not offer any guarantees to the banks.
