Chile Car Dealer Misses Coupon, Agrees to Debt Restructuring

  • Gildemeister says it has approval from holders of 70% of debt
  • Creditors will have option to buy 40% of common shares

Automotores Gildemeister SA, a Chilean car dealer, agreed to cede options to buy 40 percent of the company to its bondholders as part of a restructuring of debt. The company failed to pay a coupon on its 2021 bonds that was due Tuesday.

Leverage rose to a record in the second quarter
Leverage rose to a record in the second quarter

Gildemeister reached a preliminary agreement with holders of about 70 percent of its $700 million in dollar bonds due in 2021 and 2023 to swap the notes for new bonds guaranteed by real estate and other assets, according to an e-mailed statement. The deal also involves issuing preferential shares and rights to acquire 40 percent of the car dealer’s common shares.

The company, which holds the concession to import and sell Hyundai vehicles in Chile and Peru, will continue with normal operations, it said in the statement.

The company’s bonds have given investors one of the worst returns in the region this year, amid the economic slowdown and weakening currency. The car importer’s bonds have lost investors 34 percent in the past 12 months.

“With this agreement, the company expects to continue operating in its primary markets and meeting its obligations to its customers, employees, suppliers and other creditors," Chairman and Chief Executive Officer Ricardo Lessmann said in a statement.

Gildemeister’s bonds due in 2023 fell Tuesday 4 cents to 34 cents on the dollar. The yield jumped 2.7 percentage points to 29.3 percent, or 27 percentage points above benchmark Treasury notes. The spread on its bonds due in 2021 advanced to 35 percentage points above treasuries.

Fitch Ratings warned Nov. 20 that Gildemeister’s liquidity position was "untenable" and that it would have negative cash flow this year and next. The company had total adjusted debt of $993 million, Fitch said.

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