Intermodal Modification in Mexico

It has been forced to put on the block four port terminals: Manzanillo on the Pacific coast, Progreso on the Yucatan Peninsula, Cozumel on the Caribbean island near Cancun, and crown jewel, Veracruz, smack in the middle of the Gulf of Mexico.

Shareholders voted to sell to the U. S. company, Ports and Terminals Holdings, a subsidiary of Stevedoring Services of America, which will then become Mexico’s top port operator. In Mexico, the company is known as SSA Mexico.

TMM is also attempting to sell its stock in Mexican Railroad Transportation (TFM) to Kansas City Southern Industries. All that is needed is a green light from Mexico’s Secretariat of Communications and Transport. Undersecretary Aaron Dychter Poltolarek says the delay completing the deal is because of bureaucratic procedures, but it is virtually a done deal.

TMM chairman, Jose Serrano, says the sale of the port operation permits has been approved since April for $120 million which is to be used for the payment of $86.7 million on a matured bond issued three years ago.

Even then, the company is still $377 million in the hole with maturing bonds--one for $177 million dollars due May 15th, and another one in 2006. “The company does not have enough cash to pay its debts,” says TMM’s director general, Javier Segovia. “For weeks we have been trying to restructure this debt and have asked investors to accept what we have offered them, a debt renegotiation.”

Chairman Serrano will be heading negotiations to close the deal with SSA Mexico to hand over the ports while the sale of its majority stock will soon be announced.

Kansas City Southern Industries is already rubbing its hands and even renaming the Laredo-Mexico city rail line, “The NAFTA Rail.”

Investors asked director general Segovia “what will be left of the company after you guys are through with it?”

Segovia answered, “It will be a company without debts, which will set the platform for future growth.”

But also totally downsized.

A key TMM problem for the past two years is its claim the Mexican Treasury owes it $900 dollars in tax refunds. The Treasury, however, has taken TMM all the way up to the Supreme Court. It appears the loser will be the TMM investors.

Besides managing stevedoring services at several ports, and Mexico’s main railroad TFM, TMM has large fleets of full service trucks.

TMM was one of the rosiest companies just three years ago before its tax battle with the government began. What no one seems to know about the company—that now has accumulated $1.859 billion in debt--is just, where did it go awry?

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