The shares of one of our holding had dropped recently because of concerns that Hugo Chavez would not deliver on his promise. Ternium was forced into selling its steel mill in Venezuala to Mr. Chavez. As part of the deal, Ternium was to be paid through installment plans. There was concern that the company might not recover the payments as Mr. Chavez, definitely not on the top of anyone’s trustable list. Today Ternium reported that it received almost $300M of the delayed payments from Mr. Chavez.
Ternium S.A. today announced CVG has paid the Sidor compensation payments due on February 2010. These payments consisted of US$158.2 million due under the first tranche, and US$142.0 million mandatory prepayment due under the second tranche.
Management has been recently paying down debt with its cash flow from operations. I expect management to do the same with this payment related to the Sidor compensation. The $300M in payment plus cash from operations could mean that the company pays off $400-500M in Q1 of 2010. As of 12/31/09, the company had $2.3B in debt and $2.1B in cash. Add to the cash the $300M and the company can pay off all its debt with cash on hand.