Mexico Bracing for Massive Default That Could Set Off Global Debt Bomb: “Perversely Ironic Twist”

• Mexico Bracing for Massive Default That Could Set Off Global Debt Bomb: “Perversely Ironic Twist”
  by Mac Slavo, SHTFplan.com 
  The debt avalanches. Once it accumulates enough mass, and momentum is not sufficient to stop its collapse, it overwhelms its host, and will come crashing down on the rest of the system, too.
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  Across the planet, there are hundreds of governments – local, state and national – as well as business and households who are reaching a breaking point. Already drowning in debt, many are about to default on loan repayments, and thus set off a series of debt crises that will be met with market chaos and a tightening of easy credit for those who are most vulnerable to implosion.
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  With Puerto Rico also timed for a major default that will burden the United States, Mexico is ready to crash, and bracing for impact. Its biggest construction firm, which has been dependent upon government contracts that are now drying up, is facing default on a $31 million interest bill. And so it begins…
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  via Wolf Street: 
  In August, the bonds of Mexico’s biggest construction company, ICA, had the dubious honor of being the worst performing corporate bonds across all emerging markets. At a time when emerging economies are slowing down and the total debt exposure of EM corporations has never been higher, this was no mean feat. […]
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  Yesterday the company’s shares plummeted 22% on news that it would use a 30-day grace period to make a $31 million interest payment that was due this week. Today its shares, which have lost more than 75% of their value since January, fell a further 8% to 3.76 pesos, their lowest point in 21 years.
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  To make matters worse, the builder recently hired corporate restructuring specialist Rothschild & Co. as financial adviser, fuelling speculation that it will soon seek debt relief.
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  If ICA does fail to pay, it would be Mexico’s biggest bond default since the tumultuous days of the Tequila Crisis 20 years ago.
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  The revenue reported by the company, which depends on the government for a majority of its contracts, has sharply declined this year amidst infrastructure spending cutbacks, while the weaker peso has exacerbated the company’s leverage ratios.
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  As WOLF STREET previously reported (here and here), many Mexican corporations are acutely vulnerable to a strengthening dollar and rising U.S. interest rates. The sudden rise in central bank-engendered liquidity after the outbreak of the Global Financial Crisis enabled Mexico’s biggest companies to borrow from the international markets in much larger amounts and for much longer periods than at any other time in history. And the slide of the peso against the dollar has significantly increased the amount of leverage at some companies.
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  As the article suggests, a sluggish Mexican economy has made this company all-too-vulnerable to market failure. The dead weight of its collapse is liable to do somedamage across much of the global economic landscape. The real danger is that enough incidents could set off a domino of debt bomb explosions that risk taking the whole thing with it in a brilliant fiery scene of destruction.
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  Goldman Sachs, so often at heart of these financial matters, recently proclaimed that we are in the third wave of the financial crisis that reaches back to before 2008 and includes other major shocks to the global economy. According to Goldman:
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  read more.

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