Colombian Glass & Aluminum manufacturer Tecnoglass (NASDAQ: TGLS) has managed to pay off all its outstanding public debt, primarily 2022 notes in full during this month, a year early it has announced. Ratings firm Fitch has thus withdrawn it’s BB-rating of Tecnoglass with a stable outlook but affirmed the Barranquilla based manufacturer’s solid performance.
According to Fitch: “The ratings reflect Tecnoglass’ competitive cost structure, above-average growth profile supported by its solid order backlog, long-term relationships with customers and robust demand for its products. The ratings are tempered by its production site concentration and high working capital needs, which have resulted in weak cash flow from operations during periods of rapid growth. The ratings also reflect the high cyclicality of the new construction industry that leads to cash flow volatility.”
To allay any cash flow concerns and support that rapid growth Fitch observed, Tecnoglass late last year closed on a syndicated $300 million USD credit facility at extremely competitive interest rates, significantly lower than the notes’ issue rate.
“We were able to refinance all of our outstanding bond debt with a syndicate of banks mainly comprised of US and European based lenders, about 10 in all,” Tecnoglass CFO Santiago Giraldo told Finance Colombia today. “The facility was well oversubscribed. And we were able to attain that thanks to the fact that the lenders recognize that Tecnoglass has a sustainable advantage over the competition, and they understood that we are very much exposed to the housing segment, single family and multi family residential, segments which are outpacing the rest of the economy.”
“So while there were challenges surrounding the COVID-19 pandemic, what ended up happening last year is that construction was deemed an essential business in the US and construction never stopped. So basically, we were able to continue moving along, executing our backlog, and growing our residential segment benefitted by very low mortgage rates. So it was a good year and we are expecting to continue the growth this year now that things are recovering, and the construction industry is now moving forward with projects that were put on hold during 2020.”
Tecnoglass management will hold a webcast and conference call on Wednesday, March 2 at 10am Eastern time. To listen to the call and view the slides, please visit the Investors section of Tecnoglass’ website at www.tecnoglass.com. Please go to the website at least 15 minutes early to register, download and install any necessary audio software. For those unable to access the webcast, the conference call will be accessible by dialing 1-877-705-6003 (domestic) or 1-201-493-6725 (international). Upon dialing in, please request to join the Tecnoglass Fourth Quarter 2020 Earnings Conference Call.
“I would add that we got financed at very low rates similar to those of US based companies. Right now, we are going to be at LIBOR + 250 on a 5-year term, which is 500 basis points lower than what we previously had on our bond issuance. So that is a recognition that lenders saw Tecnoglass as a company with operations in Colombia but a business model in a target market that is US-centric, so they are underwriting that risk based on what they see for the US market as a whole,” concluded Giraldo.