UPDATE 1-TV Azteca seeks to calm investors on Iusacell
Tue June 17, 2003 01:36 PM ET
(Recasts first paragraph, updates stock price in paragraphs 2-3, details and background throughout)
By Noel Randewich
MEXICO CITY, June 17 (Reuters) - Shares of TV Azteca soared on Tuesday after management promised investors it would not divert cash into a planned acquisition and an affiliate reached a deal to reshuffle debt.
The Mexican broadcaster said it would not divert cash into phone company Iusacell CELV.MX CEL.N , which TV Azteca majority owner Ricardo Salinas recently said he would acquire through his paging company Movil Access.
Investors also reacted well to an agreement reached Monday between Unefon, in which TV Azteca has an investment, and creditor Nortel Networks Corp. NT.TO to restructure $350 million in Unefon debt, reducing it to $235 million.
TV Azteca's TVAZTCACPO.MX stock gained 8 percent to 4.32 pesos on the Mexican stock market. Azteca's American Depositary Receipt (ADR) TZA.N jumped 7.79 percent to $6.64.
Salinas last week agreed to buy wireless firm Iusacell for $10 million plus more than $800 million in debt. Analysts immediately warned that Salinas might use TV Azteca to guarantee loans to help refinance Iusacell debt.
Pedro Padilla, TV Azteca's chief executive, issued a statement late Monday, seeking to ease investor concerns. He said the company's long-term plans included a commitment to "isolate TV Azteca's solid cash generation" from other investments.
"There's increased speculation that Salinas will not co-mingle funds," said Ramon Ruiz, head of equity sales at BBVA-Bancomer in Mexico City.
On Tuesday, Merrill Lynch upgraded TV Azteca, Mexico's No. 2 broadcaster, to "buy" citing the Unefon agreement, after having downgraded it to "sell" on Friday.
"The resolution of the Nortel litigation lifts a major overhang on TV Azteca's stock, the risk of it bailing Unefon out," said Merrill Lynch in a research report.
NO CHANGE IN PLAN
Padilla said Azteca's spending plan, cemented earlier this year, included spending a substantial portion of cash in the next six years to reduce outstanding debt by about $250 million.
Salinas in the past has used TV Azteca cash to buy mobile phone frequencies and to guarantee loans to Unefon. Those moves irked investors who prefer he keep his investments separate.
Iusacell is in technical default on a $266 million syndicated bank loan and $350 million in bonds due in 2006. |
