Grupo Aeroportuario del Pacifico (G9N) Risk Analysis
Risk Overview Q4, 2023
Source: the company's latest filing for the period ended Dec 31, 2023, filed Apr 29, 2024
Risk Change Over Time
- Debt & Financing - Risk 1Changes to reference rates could have an adverse effect on our business, results of operations and financial condition.
The London Interbank Offered Rate (LIBOR) was phased-out as a reference rate in June 2023. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, chose the Secured Overnight Financing Rate (SOFR), and specifically Term SOFR, as the recommended risk-free reference rate for the U.S. (calculated based on repurchase agreements backed by treasury securities). Prior to the discontinuation of LIBOR, we amended substantially all of our LIBOR-based financing arrangements to transition them to successor rates, primarily Term SOFR. We cannot predict the extent to which Term SOFR will gain widespread acceptance as a replacement for LIBOR, the consequences of the replacement of LIBOR on financial markets generally or on our business, financial condition or results of operations specifically. Our transition to successor rates could cause the amount of interest payable on our long-term debt to be different or higher than expected. Further, Banco de Mexico has established an updated reference rate called the Funding Equilibrium Interbank Interest Rate (the "TIIE"). This is due to the international transition to reference rates reflecting local market funding conditions. The TIIE at 91 days and 182 days maturities ceased to be used in contracts in December 2023, and it is expected that the TIIE at 28 days will cease to be used by December 2024. We only have contracts with TIIE at 28 days and we expect that we will have to modify such existing contracts to adjust the TIIE calculation methodology based on the revised TIIE. We cannot assure you that the transition from the LIBOR rate or the TIIE rate to new reference interest rates will not cause disruptions in the financial markets or will not substantially increase our financing costs, which could have an adverse effect on our business, results of operations and financial condition.
Risk Highlights Q4, 2023
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 64
- Share Price & Shareholder Rights - Risk 1As a result of the volatility of the Mexican stock market, the market price of shares may experience extreme fluctuations in price and trading volume.
Lack of liquidity or market volatility may limit the ability of a holder of Series "B" shares to sell their interest and may also adversely affect the market price of our Series "B" shares. The trading volume of instruments issued by emerging market companies tends to be lower than the trading volume of instruments issued by companies in more developed countries.
- Share Price & Shareholder Rights - Risk 2The Company's bylaws can discourage acquisitions and depress the market for our shares.
Certain provisions in our bylaws could have the effect of delaying, deterring, or preventing a hostile takeover, which could be supported by certain shareholders. For example, individual shareholders (or groups of related parties) cannot own more than 10% of our Series "B" shares, except if our shareholding limits were to be amended. In addition, in the event that a person or group of related persons intended to acquire ownership of 30% or more of our shares, in accordance with Mexican legislation, said persons would be required to carry out the acquisition through a public offering, under the terms and conditions outlined in the Mexican Securities Market Law and subject only to the exceptions provided therein. These provisions may reduce the interest of certain investors in our shares.
- Share Price & Shareholder Rights - Risk 3We are subject to different corporate disclosure and accounting standards than U.S. companies.
A principal objective of the securities laws of the United States, Mexico and other countries is to promote full and fair disclosure of all material corporate information, including accounting information. However, there may be different or less publicly available information about issuers of securities in Mexico than is regularly made available by public companies in countries with highly developed capital markets, including the United States. In addition, accounting standards and disclosure requirements in Mexico differ from those of the United States. Our financial statements are prepared in accordance with IFRS, which differs from U.S. GAAP in several respects. Items on the financial statements of a company prepared in accordance with IFRS may not reflect its financial position or results of operations in the way they would be reflected if such financial statements had been prepared in accordance with U.S. GAAP.
- Share Price & Shareholder Rights - Risk 4Minority shareholders may be less able to enforce their rights against us, our directors, or our strategic shareholders in Mexico.
Under Mexican law, the protections afforded to minority shareholders are different from those afforded to minority shareholders in the United States. For example, because provisions concerning fiduciary duties of directors have only recently been incorporated into the new Securities Market Law, it may be difficult for minority shareholders to bring an action against directors for breach of this duty and achieve the same results as in most jurisdictions in the United States. In addition, the procedures for class action lawsuits were incorporated into Mexican law and became effective in March 2012; however, certain rules and procedures could be different than the ones in the United States. Therefore, in some cases it may be more difficult for minority shareholders to enforce their rights against us, our directors, or our strategic shareholders than it would be for minority shareholders of a U.S. company.
- Share Price & Shareholder Rights - Risk 5Disputes with or among our shareholders or challenges to certain provisions of our bylaws may affect our operations.
In the past, there have been disputes with certain shareholders primarily regarding certain shareholding limitations set forth in our bylaws. See - "The Company's bylaws can discourage acquisitions and depress the market for our shares." These disputes have led challenging shareholders to commence legal proceedings seeking (i) to modify our bylaws to eliminate the foregoing shareholding limitations and (ii) to terminate AMP's special rights that stem from AMP's ownership of our Series BB shares. Although the Mexican Supreme Court has upheld the validity of these provisions of our bylaws, we cannot guarantee that future challenges to our bylaws will not emerge. If disputes with certain of our shareholders were to occur in the future, it is not possible to predict if they would distract our management or result in a deadlock at our shareholders' meetings, or what effects such events might have on the price of our stock, its liquidity or our market value and the effects that these conflicts could have on our business or results of operations.
- Share Price & Shareholder Rights - Risk 6Failure to comply with certain requirements of the privatization guidelines and the participation agreement relating to our privatization could have a material and adverse effect on our operations or the value of our securities.
Pursuant to the guidelines published by the Mexican government during the first phase of our privatization and the participation agreement setting forth the rights and obligations of each of the parties involved in our privatization, AMP assumed certain rights and obligations. Although we believe AMP satisfies all their requirements under the privatization guidelines and the participation agreement, there can be no assurance that allegations or official inquiries relating to AMP's compliance with its obligations under those requirements will not take place. In the event of future inquiries or an official finding that AMP is or was not in compliance with the requirements of the privatization guidelines or the participation agreement, AMP could be subject to fines and the technical assistance agreement between us and AMP could be terminated, which could have a material effect on our operations. In addition, there can be no assurance that any such developments will not result in a material decrease in the market value of our shares or ADSs or their liquidity.
- Share Price & Shareholder Rights - Risk 7Disputes among AMP's shareholders may affect our shareholders' meetings or management.
On November 19, 2014, Controladora Mexicana de Aeropuertos, S.A. de C.V. ("CMA") became 66.66% owner of the capital stock of AMP. As a result of this transaction, CMA agreed that the minority shareholders' consent is required with respect to certain significant actions or decisions. See "Item 7, Major Shareholders and Related Party Transactions – Major Shareholders – AMP Trust, Bylaws and Shareholders' Agreement." In the past there have been some disputes among AMP's shareholders. If disputes among AMP's shareholders were to occur in the future, it is not possible to predict if they would result in a deadlock at our shareholders' meetings or distract our management, or what effects such events might have on the price of our stock, its liquidity or our market value and the effects that these conflicts could have on our business or results of operations. In addition, AMP's veto, appointment, and other rights could adversely impact our operations and constitute an obstacle for us to bring in a new strategic shareholder and/or operator.
- Share Price & Shareholder Rights - Risk 8AMP, our strategic shareholder, has significant influence over our operations, and AMP's interests may differ from those of other shareholders.
AMP holds Series BB shares currently representing 15% of our total capital stock. The Series BB shares have certain special rights that allow AMP to exercise significant influence over our operations. Through its right to appoint and remove members of our senior management, AMP participates in the decision-making process of our management in areas such as business strategy, operations, financing, acquisitions and dispositions of assets or business. Pursuant to our bylaws, AMP (as holder of our Series BB shares) has the right to appoint and remove our top-level executive officers (upon consultation with our Nominations and Compensation Committee), to elect four members of our board of directors and their alternates and to designate three members of our Operating Committee and 20% of the members of each other board committee (or one member of any committee consisting of fewer than five members). Audit Committee members are selected according to Mexican and U.S. independence standards. Certain matters require the favorable vote of the majority of the Series "BB" shares (including the approval of our financial statements, increases or decreases in our capital stock, the payment of dividends, the amendment of our bylaws and any decision that has the objective to modify or annul its right to appoint our top-level executive officers). These rights are not conditioned on whether the technical assistance agreement and the participation agreement remain in force. Pursuant to our bylaws, if at any time AMP (as the holder of our Series BB shares) were to hold less than 7.65% of our capital stock in the form of Series BB shares, such shares would be mandatorily converted into Series B shares, which would cause AMP to lose all of its special rights. Shareholders of AMP have allocated among themselves certain veto rights relating to the exercise by AMP of its veto and other rights, which increases the risk of impasse at AMP shareholders' meetings and ultimately at our shareholders' meetings. Differences in points of view among AMP's shareholders with respect to our management could affect our results of operations. The interests of AMP may differ from those of our other shareholders.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
