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No easy way out for Mexican firms

Corporate losses on foreign-currency hedging deals are resolvable but the road to agreement is difficult.

One year on and some of the Mexican corporates that made big losses from bad bets in the foreign-currency derivatives market can finally see an end to their saga. One of them is Gruma, the country’s biggest maker of corn flour, which lost Ps11.2 billion ($847 million) from these trades after the peso plunged in value.

Last month the company signed deals with Royal Bank of Scotland and Standard Chartered to unwind a total of $36.8 million in foreign-currency hedges. It plans to pay the two banks through two three-year loans for $13.9 million and $22.9 million respectively.

This is the second round of agreements that the company has made with its bank creditors. In March it struck a deal with Credit Suisse, Deutsche Bank and JPMorgan to close $668.3 million in foreign-currency contracts through a seven-and-a-half year loan.

These agreements mean that Gruma is now in a position to refinance its outstanding debt: a Ps3.4 billion loan from Bancomext and a $197 million loan from BBVA. Both facilities were due in 2010 but the Bancomext loan has been extended to 2019 and the BBVA one to 2014. Gruma announced that final documentation should be wrapped up early this month.

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