Chile’s La Polar Soars on Bets Fund Raising to Succeed
Empresas La Polar SA (LAPOLAR) gained for the first time in eight days on speculation its plan to raise funds will allow the Chilean retailer to meet growth targets and avert a second bankruptcy in 13 years.
The stock advanced 9.1 percent to 180 pesos at 3:35 p.m. in Santiago trading, the biggest intraday gain since Aug. 21. The shares are down 44 percent in the past 12 months.
La Polar plans to sell about 120 billion pesos ($254 million) of new shares, and would sell assets in Colombia to generate cash if the issuance of new stock doesn’t raise at least 90 billion pesos, Chairman Cesar Barros told reporters yesterday.
“The market likes the idea of having another option if the share sale doesn’t reach targets,” Natalia Burgos, a portfolio manager at Euroamerica, said in a phone interview. “It means they don’t have their hands tied.”
La Polar plans to use the funds it raises to overhaul brands and renovate stores in a bid to boost sales 63 percent by 2014, Chief Executive Officer Patricio Lecaros told reporters yesterday. The plan includes developing private labels and refurbishing existing locations to help it boost sales to 462 billion pesos by 2014 from an estimated 284 billion pesos this year, Lecaros said.
Should the share sale fail, “we have a plan B -- La Polar has very attractive assets in Colombia,” Barros said yesterday. “It would be silly for our creditors to cause a bankruptcy as even without the share sale we’re heading back to breakeven.”
The discovery last year of accounting irregularities led to the dismissal and trial of some former managers. The new shares will be sold before Oct. 29 as part of an agreement with creditors.
The Santiago-based company said in June 2011 that it had been unilaterally restructuring terms of clients’ past due loans as a way to cap loss provisions and boost profit.
About 100 billion pesos from the share sale will be used to refurbish stores and fund consumer loans in Chile and Colombia, and 20 billion pesos will go toward compensating customers affected by the loan modifications, according to a presentation on the company’s website.
La Polar will seek to cater to a wider variety of clients instead of only middle- and lower-income segments, Lecaros said. “We want to take a little bit of market share from each of the three bigger players, but not too much to make them mad,” Lecaros said. The biggest department store operators in Chile are SACI Falabella (FALAB), Cencosud SA and Ripley Corp SA. (RIPLEY)
The company will open its fifth store in Colombia in November. It operates 42 stores in Chile, Lecaros said.
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