Now It’s Her Turn to Bring ICA Back From $1.35 Billion Default

(Bloomberg) -- Guadalupe Phillips, who’s trying to pull Empresas ICA SAB back from Mexico’s biggest corporate-bond default, said she doesn’t have a lot of cards to play when the company begins negotiations with bondholders.

“There aren’t a lot of formulas,” said Phillips, who was named chief executive officer of ICA last month, in an interview. “We have already presented a business plan and now we have to trust the market’s efficiency.”

Negotiations are likely to be painful for bondholders. The notes are currently trading at about 19 cents on the dollar. “I think the bond prices do reflect what the market believes ICA is worth,” Phillips, 45, said at the company’s offices in Mexico City.

In a way, Phillips was born for this job. Her grandmother, Dolores Olmedo, was a founding partner in a predecessor company to ICA in the 1940s. ICA went on to become the builder of many of Mexico’s most iconic structures, from the Basilica of Our Lady of Guadalupe to the soccer cathedral Azteca Stadium. (Olmedo also became known for being a friend and benefactor of famous muralist Diego Rivera.)

While the company has weathered Mexico’s economic turbulence for decades, it fell on hard times last year when the government began scaling back infrastructure spending. ICA stopped payments on $1.35 billion in overseas notes a year ago and has been stuck in limbo ever since. Efforts to work with creditors on a restructuring plan have been stymied by executive departures and the unexpected death of Phillips’s predecessor, Luis Zarate Rocha, in October.

ICA is now pursuing new government contracts to build momentum before it heads into talks with debt holders, said Phillips, who had joined the company only 10 months earlier as director for financial restructuring.

“We made important decisions in restructuring the company and creating a new entity that could participate in new contracts,” she said. “We’re in a different position to negotiate with bondholders because today, we can at least pitch a viable company. That was the big question at the beginning of the year: How do I pitch ICA?”

Strategic Assets

After a tumultuous year, it’s hard to say if the worst is behind ICA, she said, although she certainly hopes so. One thing she’s confident about: The Mexico City-based company won’t be selling any more strategic assets, such as its highly-valued controlling stake in Grupo Aeroportuario del Centro Norte SAB, or OMA, she said. Instead, it will look for value in projects like building the terminal for Mexico City’s new airport. The company teamed up with billionaire Carlos Slim to offer the lowest bid last week on construction of the futuristic building, designed by Norman Foster and Slim’s son-in-law, Fernando Romero.

If the group wins the contract, which will be awarded Jan. 6, ICA will have to tap into the remainder of a $215 million convertible loan from Fintech Europe SARL, the firm run by billionaire investor David Martinez. The rest has been used for a toll road, linking the states of Tamaulipas and Guanajuato, and as working capital for a contract to build a foundation slab for the airport. Sometime in the future, the company would also consider development capital securities, known as CKDs in Mexico, to fund projects.

Taking up all of Fintech’s credit line doesn’t mean the builder won’t be able to look for other new contracts. “As long as we use that capital wisely, I don’t see why ICA can’t pursue new work,” Phillips said. “There are many important infrastructure projects in Mexico.”

First Woman CEO

Phillips is the only female CEO among Mexico’s 50 largest public companies, ranked by enterprise value. She is also the first woman to lead ICA, a company historically led by engineers.

“I think I raised more eyebrows for being a lawyer than for being a woman,” she said. “Not being an engineer has been the greater challenge, but I think I can bring a different perspective that can add more than it can subtract.” Before joining ICA, she was vice president of finance and risk at Grupo Televisa SAB, where she says she still has many friends.

Her family connection with ICA has made Phillips especially vested in making sure the company recovers, she said.

“We have a big challenge ahead,” Phillips said. “We’ve always been part of the construction of modern Mexico, so it’s important a company like ICA survives.”

To contact the reporter on this story: Andrea Navarro in Mexico City at anavarro30@bloomberg.net. To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Crayton Harrison