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TV Azteca concession guarantee to Banco Azteca not linked to non-payment of bondholders – CEO

by Feike de Jong and Leonardo Peralta

The use of TV Azteca's [BMV: AZTECACP] broadcast concessions, valued at MXN 9.4bn (USD 527m) as a guarantee for a loan from Banco Azteca at the end of 2020, was not linked to the subsequent postponement of payments to bondholders, CEO Rafael Rodriguez told Debtwire.

The concessions to the 89 channels of Azteca Uno, the 89 Channels of Azteca 7 and Televisora del Valle de Mexico (known as adn40), were given as guarantees to Banco Azteca in September 2020, according to documents filed with Mexico’s telecommunications commission IFT. In February 2021 the company announced that it would be postponing payments to bondholders. 

All of TV Azteca’s concessions were given as a guarantee to Banco Azteca, for a MXN 1.7bn secured loan, as part of the modification of a revolving credit facility dating from December 2009, Rodriquez said. Banco Azteca and TV Azteca are both part of Grupo Salinas.

“This was a traditional revolving credit line we had with Banco Azteca,” Rodriguez said. “In the beginning of 2020, as part of our restructuring plan and efforts at cost control and financial discipline that we implemented in TV Azteca basically from the end of 2018 onwards. In March 2020, we started to restructure our relationship with Banco Azteca and the revolving credit line was converted into a traditional loan.”  

“Evidently the bank, because of its regulatory status, required guarantees such as it would ask of any client and in this case it asked for real guarantees,” Rodriguez said. “So at that moment we had the possibility of either making use of the concessions, which we had just renewed or maybe use real estate or other type of assets. At the moment of renegotiating the credit we considered constituting a mortgage in telecommunications which is allowed by Mexico’s telecommunications law and perfectly operated and accepted by regulators such as the Mexican telecommunication commission IFT. We checked with the bank and we decided it was a good option both for the bank and for us.”

The delay between the decision to restructure the revolving credit line in March 2020, and the formal registry of these concessions as guarantees in January 2021 was due to the COVID-19 pandemic slowing administrative processes in the IFT, according to Rodriguez.  He added that the refinancing of the Banco Azteca revolving credit line was part of the company's financial planning from 2018 onwards and was in no way related to the company postponing payments to bondholders in the 1Q21 due to particularities of the negotiations with bondholders.  

The concessions given as a guarantee to Banco Azteca do not include physical infrastructure, according to Rodriguez. He added that TV Azteca has completely fulfilled its obligations with Banco Azteca as of now.    

The concessions are not seen as an asset which could be part of a restructuring, according to a source close to the company, because it is a government concession.  

TV Azteca bondholders do "not really" consider the concessions to be a recoverable asset, according to a source close to bondholders. 

A second source close to bondholders said that he did view the concession as an asset, but doubted its relevance, as the company is not in liquidation and is unlikely to go into liquidation.

If TV Azteca defaulted on its debt with Banco Azteca, Banco Azteca would be able to sell the concessions, according to Rodriguez, though it would be difficult. 

"I don't think it would be easy, like executing a piece of land and sell it," said Rodriguez. "In this case the concessions would have their own particular complications, but the law itself considers this possibility and the constitution considers the possibility that the bank keeps these titles and afterwards exploits or commercialize them directly or through a third party and obtains a benefit and is able to charge for it." 

TV Azteca bondholders launched an involuntary Chapter 11 on 21 March, after the company stopped making interest payments on its USD 400m 8.25% senior bonds in February 2021.