Corte Ingles Said to Hire Morgan Stanley to Restructure Debt
El Corte Ingles SA hired Morgan Stanley (MS) to help restructure about 5 billion euros ($6.4 billion) of debt, according to three people familiar with the matter.
Europe’s largest department store chain is renegotiating the terms of its borrowings with lenders including Banco Santander SA (SAN), said the people, who asked not to be identified before the deal is complete. As part of the process the retailer plans to securitize receivables from its consumer finance unit, the Madrid-based company said in a statement.
El Corte Ingles is facing a collapse in consumer confidence after Spain’s unemployment rate surged to 27.2 percent in the first quarter, the highest in at least 37 years. Efforts to address the European Union’s biggest budget deficit crimped economic growth, with retail sales falling almost 11 percent in March compared with a year earlier.
“The obvious message is that things are tough in Spain,” said John Raymond, an analyst at CreditSights Inc. in London. “Concerns in Spain have focused so far on the sovereign and real estate companies and we’ve seen remarkably little of this sort of news about the biggest companies.”
An official at Corte Ingles, who asked not to be identified citing company policy, declined to comment beyond the statement. Officials at Morgan Stanley and Banco Santander wouldn’t comment when contacted by Bloomberg.
The retailer said yesterday that the “re-ordering” of its debt was part of “ordinary activity in its financial area” to give the company greater flexibility. El Corte Ingles has real estate in “‘unrepeatable’’ locations whose value is several times the value of the refinancing, according to the statement.
The closely held company is one of Spain’s biggest employers with a workforce of about 100,000.
It’s also the third-biggest department store chain in the world by sales, after Hoffman Estates, Illinois-based Sears Holdings Corp. (SHLD) and Cincinnati, Ohio-based Macy’s Inc. (M), according to data compiled by Bloomberg. El Corte Ingles runs 81 department stores in Spain and two in Portugal and attracts 1.5 million visitors a day, according to its 2011 annual report.
‘‘The deal is sensible amid a context of low interest rates,” said Daniel Lacalle, a senior portfolio manager at Ecofin Ltd. in London. “The company may try to have its debt guaranteed by assets such as its department stores, which are located in prime locations and will be very attractive for investors -- even if the Spanish market continues to be tough.”