Ricardo Salinas Is an X Factor for Holders of Mexico’s Total Play Bonds

Salinas, chair of the company’s board, is notorious for his sharp-elbowed negotiations with everyone from bondholders to local tax authorities to business rivals

Ricardo Salinas speaks during the Bitcoin 2022 conference in Miami.
By Michael O'Boyle
April 26, 2023 | 01:18 PM

Bloomberg — Controversial billionaire Ricardo Salinas is a wildcard for investors in Total Play Telecomunicaciones’s bonds as the Mexican cable provider tries to get as much as $300 million of financing.

Salinas, chair of the company’s board, is notorious for his sharp-elbowed negotiations with everyone from bondholders to local tax authorities to business rivals. Another company he owns, broadcaster TV Azteca SAB, defaulted on $400 million of dollar-denominated bonds in 2021, and is facing litigation in the US from debtholders looking to force the company to make good on the notes.

But in the case of Total Play, Salinas has shown more of a commitment to the business, according to Moody’s Investors Service. He’s injected around $464 million into the company over nearly a decade, helping it expand its fiber optic network to more than 4 million subscribers in Mexico.

Total Play’s bonds plunged to distressed levels after the company announced quarterly results on February 23. They have turned in the worst performance of any Mexican corporation in a Bloomberg Latin America index this year.

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Its notes due 2028 have dropped about 20 cents on the dollar to about 59 cents, though they pared losses on Tuesday and Wednesday as the company said it was refinancing local debt.

The drop was at first largely driven by Total Play’s disclosure that it had spent more in the fourth quarter than its previous guidance implied, and had surprisingly high 2023 expenditure plans, according to Alejandro Di Bernardo, a money manager at Jupiter Asset Management. The company should have better communicated these facts to investors sooner, he said.

Meanwhile Total Play is facing short-term debt maturities. It’s been looking to lock down a bank loan from a global bank, at a time when a crisis among US regional lenders and the collapse of Credit Suisse Group AG have hit markets.


A Total Play representative said that the company continues in its conversations with different institutions for the financing required for 2023.

“In the coming days Totalplay will announce its financial results, which we trust will clarify doubts about its liabilities, as well as our strategy for the coming months,” according to a spokesperson.

A spokesperson for Grupo Salinas did not respond to a request for comment.

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Azteca Precedent?

Adding to the pressure on Total Play, TV Azteca defaulted on dollar-denominated bonds in 2021, though it continued to pay its local currency debt and even paid some off. The broadcaster said in early 2021 that it was under rising pressure from falling advertising sales during the pandemic, and that it wanted to restructure its debt. Investors sued in the US to demand repayment.


TV Azteca in turn sued in Mexico last year. Debtholders said that the bond trustee got notification about that litigation in February. But the investors themselves said they only learned of that suit in March when Bloomberg reported that a Mexican judge blocked all payments on the TV Azteca debt until the World Health Organization officially declares an end to the Covid 19 pandemic. That litigation signals that a separate Salinas company is fighting hard against creditors trying to collect money.

Investors in Total Play’s debt fear Salinas could end up treating them similarly to how he was treating TV Azteca’s bondholders, Jupiter’s Di Bernardo said. But the confluence of factors drove down Total Play’s bond prices too much, he said.

“Total Play is a superior credit to TV Azteca and securing funding for this year should be a positive catalyst for the bonds,” Di Bernardo said, declining to comment on whether he has been buying recently. “It should pay higher yields than competitors given Salinas’s track record with other companies, but its bonds shouldn’t be trading as low as 50 cents on the dollar.”


Bondholders are closely watching the company’s efforts to get more financing. The cable and internet provider is hoping to borrow $200 million to $300 million from an international bank to refinance debt that’s due in 2023, Alejandro Rodriguez, Total Play’s chief financial officer, said on a conference call on Feb. 24.

Stifel Nicolaus & Co. analysts said in a March 30 note that the company was making progress toward getting the financing, which helped boost its bonds due 2025 by 10 cents on the dollar, to about 65 cents, early this month.

The analysts said that management had told them the deal was being delayed as Total Play changed the trustee for the $300 million loan from Banco Azteca, controlled by the billionaire, to Mexican bank CIBanco. The aim of that move was to reduce the perceived risk that the bank loan was too tied to Salinas, and make it easier to syndicate the loan, according to the note.

Some strategists think the company is strong enough that it will be able to sort out its financing needs.

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“The fact that they need financing isn’t a good position to be in, in today’s markets, but the risks are more than priced in,” said Ben Hough, director of corporate research at BCP Securities LLC in Greenwich, Connecticut, who’s recommending clients buy the bonds at current levels.

“We’re constructive on the credit. We feel pretty comfortable they will be successful in rolling over the short-term debt,” he added.

Down 23%

Total Play bonds have handed investors losses of more than 23% this year, compared with about a 2.5% gain in corporate debt in the nation, based on Mexican company components of a Bloomberg Latin America index.


By some measures, Total Play’s balance sheet looks relatively strong. Its $2.7 billion of net debt at the end of 2022 was equal to about 3.3 times its earnings before interest, taxes, depreciation and amortization. That’s below other similarly rated Latin American peers, Jupiter’s Di Bernardo said.

The company could boost its Ebitda and achieve positive operating cash flow by cutting back its expansion plans, according to Moody’s. Total Play said in February that it expects capital expenditure in the range of 15 billion to 17 billion Mexican pesos ($830 million to $945 million) this year.

A big X factor is Salinas himself, who is also founder and president of Grupo Salinas, a conglomerate. But to Alexis Panton, an emerging markets strategist at BNP Paribas in New York, TV Azteca’s default and legal actions don’t necessarily imply problems for Total Play bondholders. The cable company is gaining market share, and Salinas has demonstrated a history of being willing to invest and support the business because it should keep performing well, Panton said.

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“This company is doing a billion dollars of Ebitda a year.” Panton said. “There’s a huge value proposition in the long term” for Salinas.

--With assistance from Maria Elena Vizcaino

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