Mexican steelmaker Ahmsa is "at a very advanced stage" of a $300mn agreement with steel manufacturer Villacero and plans to make an official announcement on the Mexican Stock Exchange (BMV) later today, a source told Argus.
The steelmaker was valued at $1.6bn but also carries $1bn in debt. As part of the agreement, it is believed Villacero will inject $250-300mn of working capital into Ahmsa.
In March, Villacero, alongside fellow Luxembourg-headquartered steelmaker Ternium and South Korean steelmaker Posco, expressed an interest in purchasing the beleaguered steelmaker's assets.
Ahmsa has been suffering financial difficulties for several years, having reported operating losses of 2.2bn pesos ($98mn) last year, compared with 859mn pesos in 2018. In June last year, Ahmsa restructured its debt by securing a $575mn credit facility from Cargill, which included a $475mn loan and a $100mn revolving credit facility. In October, Ahmsa used $19.9mn of the credit line and this month its Minosa and Cicsa subsidiaries entered into finance restructuring talks with creditors, vendors and clients.
Unforeseen operational costs have added to Ahmsa's financial woes, including the purchase of health and safety equipment and crippled logistics due to the Covid-19 pandemic. But the USMCA agreement seems to have bolstered Ahmsa's value for fellow steel producers, given the new regional content requirements for automotive manufacturing. The agreement, which takes force on 1 July, requires 70pc of all content in North American automotive production be sourced regionally within the next seven years.
With Ahmsa added to its portfolio, Villacero would be able to strategically expand its production line to include coal mining asset Minosa. Rival bidder Techint, which owns the Ternium and Tenaris subsidiaries, has an interest in acquiring the company because of its ability to manufacture steel slab, necessary for its operations.
The only slab producers in Mexico are Ahmsa in Monclova, Coahuila state, and Arcelormittal in Lazaro Cardenas, Michoacan state. Villacero and Ternium have manufacturing and distribution facilities across Mexico, but their main operations are in Monterrey, Nuevo Leon state, which borders Coahuila.
Ahmsa has a total steelmaking capacity of 6.5mn t/yr and is currently operating at 40pc of capacity after idling blast furnace 6 in January.
