La Polar Takeover Bids Said to Be Halted Amid Debt TalksJaviera Quiroga
Investors considering takeover offers for Empresas La Polar SA have told the Chilean department-store operator it must finish a debt restructuring before talks can take place, according to a person with knowledge of the matter.
The restructuring process with pension funds and banks that own the company’s bonds is starting and shouldn’t take long, said the person, who asked not to be identified because the information is private. While potential buyers have approached La Polar, talks are on hold, the person said.
Foreign investors aren’t willing to start negotiations until the debt talks are completed and La Polar closes its five stores in Colombia, the person said. The company, with a market value of about $99 million, has shuttered two shops already and expects to close the others by June, he said. Chilean regulators would block a takeover by local department stores because of competition concerns, he said.
“If La Polar is able to renegotiate its debt, then it will be adding value for any potential buyers,” Guillermo Araya, head of research at Santiago-based brokerage Renta 4 Corredores de Bolsa SA, said in a telephone interview. “The company is able to generate operating profits in Chile, and the expectations are positive.”
La Polar expects to reach an agreement with creditors to restructure its debt within the next six months, Chief Executive Officer Patricio Lecaros told shareholders today at an annual general meeting, newspaper Diario Financiero reported.
La Polar shares surged as much as 7.6 percent to 60 pesos before ceding gains and advancing 0.5 percent as of 1:58 p.m. in Santiago. The shares have dropped 70 percent in the past 12 months, the worst performance of any Chilean stock in the period.
La Polar, which defaulted on 493 billion pesos ($1.1 billion) of debt after revealing accounting irregularities at its credit-card operation in 2011, had total debt of 207 billion pesos at the end of 2013, including 189 billion pesos of bonds, according to company financial statements. It told regulators April 10 that it is renegotiating the debt.
Chairman Cesar Barros said at the time that the “current financial burden limits La Polar’s capacity to grow and the possibility for shareholders to receive dividends.”
La Polar’s press office declined to comment.
The Santiago-based company’s 2011 default came after it said that it had been unilaterally restructuring past-due consumer loans to make them look current, capping loss provisions and boosting profit. After amending financial reports, it recorded a 2011 loss of $1.12 billion, according to data compiled by Bloomberg.
La Polar’s peso-denominated bonds due in 2022 rose to 11.89 percent of face value today from 10.01 percent yesterday, and 33.95 percent at the end of last year, according to data from the Santiago stock exchange. Its zero-coupon bonds due in 2032 fell to 2.65 percent of face value today from 3.6 percent yesterday.