Announcement of Underwriting of Stock Issue in Mexico on June 19, 1962

. _ ... ' .,... .... .-;.(:- FOR IMMEDIATE RELEASE t .INTERNATIONAL FINA.NCR CORPORATION W1a1e H STREET, N.w., WASHINGTON 25. o. c. TELEPHONE: EXEcuT,vE3-6360 • IFC Press Release No. 62/6 Jlllle 19, 1962 SUBJECT: Underwriting of stock Issue in Mexico The following announcement is being made today in Mexico City by the \\ International Finance Corporation and Credito Bursatil of Mexico. The International Finance Corporation (IFC) and Credito Bursatil, a Mexican financing institution, ha.ve formed a syndicate to underwrite a large issue of capital shares of a Mexican steel company. The underwriting will assist Compania Fundidora de Fierro y Acero de Monterrey, s.A. (FUNDIDORA), the largest private steel company in Mexico, to obtain additional financing to complete its current program to expand steel production from 200,000 to • • 500,000 tons annually. This is the first underwriting in which IFC has engaged, and is one of the lE...rgest ever undertaken in Mexico. Kuhn, Loeb & co. Incorporated, Handelsfinanz A.G., and Morgan Guaranty International Finance Corporation are joining IFC as participants and will take up part of the IFC underwriting commitment • The syndicate's agreement was announced following an extraordinary meeting of shareholders of FUNDIDORA in Mexico City today at which the shareholders approved an increase in the Company's capital from 275 million pesos to 321 million pesos. The. new issue, composed of 458,333 shares, will be offered for a legal period to current shareholders on a basis of one for six already held. • The offering will commence on June 20 and will terminate on July 6, and the offering price to shareholders will be 110 pesos per share. Any pa.rt of the • . .. "~ - 2 - •• offering not subscribed by shareholders will be taken up by the under- • writers and immediately offered for sale to investors in Latin America, Canada, Europe a.nd pa.rticula.rly in Mexico where the shares will be widely available. The offering has not been registered under the Securi- ties Act of 1933 and the shares are therefore ~ot being offered in the Uni·ted States. The Mexican peso is freely conve1·tibl0 and there are no governmental restrictions in Mexico on transfers of' d.i:v'idends or capital from MeY~can invest~ents owned abroad. The value of the offering is somewhat more than US$4 million. IFC, an af·filiate of the World Ba.alt, and Credi to Bu:rsatil, a sub- sidiary of Ba..~co Nacional de Mexico, as a syndicate agreed to provide the Company with a firm underwriting of' the new issue. IFC's participation •• in the syndicate, together with its sub-underwriters, is 75%; and Credito. • Bursatil's is 25% • Credito Bursa.til is owned chiefly by Banco Nacional, the largest private bank in Mexico a.nd one of the outstanding financial institutions in that country. other financial. institutions o"ming shares in Credito Bursatil are: Banque de PariA et des Pays-Bas of Paris; Morgan Guaranty International Banking Corporation; Banco Hispano-Americano of Madrid; and MM. de Neufllze, Schlumberger & Cie. of' Paris. In addition to the syndicate underwriting, IFC will purchase out- right 128,000 shares of' FUNDIDORA common stock. This transaction will ,1 make available· somewhat more than $Ll million to the Company to help in financing the expansion. •• The Company undertook its program to increase steel ingot capacity and to enter into the production of flat steel about six years ago. Total • ..,.,,.,,.  . ( - 3 - • • • cost is estimated at almost $100 million. So~ of the financing has been provided through preYious capital increases and retained earnings, while the rest has been raised through borrowings, including $43.3 million from the U.S. Export-Import Bank. This program is now nearing completion and will make an import~t contribution in Mexico's economic development by bringing the country close to self-sufficiency in steel production. FUNDIDORA produces rails and accessories, structural. and merchant bars, reinforced bars, railroad ca.r wheels, steel structures, iron castings, wire rods and wire. The Company was founded in 1900 and became the first vertical.ly integrated steel company in La.tin America. Today it is largely self'-suff'icient in raw materials and is the second largest steel producer • • in Mexico. people • Together with its several subsidiaries, it employs about 6,700 For the past 45 years, FUNDIDORA bas had a record of profitable operations and its stock has become one of' the most active on the Mexican exchange. A substantial number of its shares a.re held by Mexican invest- ment :d.nstitutions. IFC'a gross commitment comes to more than $4.l million, the largest which IFC has ever made. Mr. Eugene R. Black, President of IFC (as well as thei World Bank), in a message sent today to Mr. Carlos Prieto, Chairman of' the Boarci of FUNDIDORA, following the Shareholders' Meeting, said in part: ''The purchase of shares in FUNDIDORA is an indication of the con- fidence of outside investors in the future of this Company and of Mexico~ • • We hope that the underwriting by IFC, Credito Bursatil and the otner cipsnts will conijribute to the development of the Mexican capital market partj_ ...  . . . - 4 - • • .;. • in several ways. It should assist in developing a potential. source of private industriaJ. financing which the Mexican investing public -- Mexico• s growing middle class -- represents. And it should facilitate the estab- lishment of contac·ts bet·ween Mexican and international investors leading to means of cooperation which could prove useful in investment projects." Although IFC has been in existence since 1956, it has been able to subscribe for capital shares or underwrite capital issues only since last autumn. At that time, its Board of Governors approved a charter amendment which enabled IFC to invest in equity; previously, it had been restricted to loan investments • • • • •