Announcement of Investment in Compania Fundidora de Fierro y Acero de Monterrey, S.A. (FUNDIDORA), Mexico on May 31, 1966

IFC Press Release No. 66/9 Subject: Investment in Corapania Fundidora For Release AM Newspapers de Fierro y Acero de Monterrey,. May 31, 1966 S ,A. (FUNDIDORA), Mexico Compania Fundidora de Fierro y Acero de Monterrey, S.A. (FUNDIDORA), the largest private steel producer in Mexico, has completed arrangements to finance part of its current expansion program by raising the equivalent of $13.2 million. The aim of the program is to increase the company's ingot capacity from 500,000 to 750,000 tons, and to accomplish a corres- ponding increase in its output of steel products. Of the new financing, $7.2 million equivalent will be raised by a • new issue of common stock to be offered on a rights basis to the company's shareholders in Mexico. Credito Bursatil, a Mexican financial institution, and the International Finance Corporation, an affiliate of the World Bank, will share equally in underwriting t'~is issue. In addition, Credito Bur- satil and Kuhn, Loeb & Co. together with IFC will place privately $6 mil- lion of FUNDIDORA convertible debentures denominated in United States dol- lars. Kuhn, Loeb & Co., Morgan Guaranty International Finance Corporation of New York and a European institution are joining IFC in underwriting the share offering and they will take up most of the IFC underwriting connnitment. The new share issue will consist of 750,000 shares of common stock with a par value of Mex$ 100 each, offered at a price of Mex$ 120 each on the basis of one new share for each six shares already held. The offering • will begin on May 31 and will last until June 30, 1966. The $6 million of convertible debentures will have a 7% coupon, mature in 1984, and be con- vertible into common stock after December 31, 1966.  • - 2 - Both the share and debenture issues were approved today (May 30) at a meeting of FUNDIDORA stockholders in Mexico City. FUNDIDORA was founded in 1900, and has a record of profitable opera- tions which goes back nearly half a century. The company manufactures a wide variety of steel products, including flat-rolled products, structurals, wire rod3, bars, etc. The company•s continuous growth in recent years has reflected the generally vigorous state of the Mexican economy and a steadily rising demand for steel. The company began its current expansion program in 1954. In the first phase, it expanded ingot capacity from 200,000 to 500,000 tons per year and began the production of flat-rolled steel products. This part of the program • was completed in 1963. The current phase of the program is virtually complete with respect to finishing capacity, and the entire program is expected to be complete by the end of 1966. In the meantime, the company is formulating plans which would raise its ingot capacity to 1,000,000 tons. L FUNDIDORA's share issues of recent years, which have also been under- written by IFC and other syndicate members, have enabled the company both to expand its productive capacity and to broaden its ownership; and its shares have established a strong position in Mexican stock exchanges. After a share issue in 1962, the number of owners of FUNDIDORA grew to 700; to- day, following an issue in 1964, they are estimated to number 2,000. Like those of the past, the securities issues authorized today will serve both co increase the company's output and to widen its access to capital markets. FUNDIDORA has long had a close relationship with Credito Bursatil. Credito Bursatil is owned chiefly by the Banco Nacional de Mexico, the largest •  - 3 - • private bank in Mexico. Other institutions owning shares in Credito Bursatil are Banque de Paris et des Pays-Bas, of Paris; Morgan Guaranty International Banking Corporation; Banco Hispano Americano, of Madrid; and MM. de Neuflize, Schlumberger & Cie. of Paris. FUNDIDORA has also had close working relations with IFC since 1962. IFC became a shareholder of the company in that year and entered into underwriting and investment commitments of some $4.1 million in conne~tion with a stock issue of $5 .1 million equivalent made in order to complete the fi1:·st phase of the company's expansion program. In 1964, IFC entered into investment and underwriting commitments amounting to $6.3 million in connection with a stock issue equivalent to $12.5 million, made in order to begin the currer.t phase of the company's program. Including its present corranitments amounting to • approximately $6 million, IFC has undertaken up to now over $16 million of investment and underwriting commitments in connection with FUNDIDORA. All of the shares underwritten by IFC in 1962 and 1964 were acquired by others, mainly Mexican investors • •