Chile’s Gildemeister Dollar Bonds Jump as Cash Recovers

Two weeks after sinking to a record low, the bonds of Automotores Gildemeister SA are rebounding as the Chilean car dealer said it generated the most cash in six quarters, easing concern it will seek to restructure debt.

Gildemeister’s $400 million of notes due in 2021 surged 5.5 percent to a three-week high today after the company reported yesterday $36.2 million of second-quarter free cash flow, the money it makes from operating activities minus capital spending. The bonds have climbed 7.75 cents on the dollar from the low of 56.5 cents on Aug. 21, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

While Gildemeister struggles to revive sales as Chile’s economy falters, the car dealer’s ability to stem a cash drain is fueling optimism among some investors that it will be able to repay debt, said Diego Torres, the head of emerging-market corporate debt research at MCC Securities Inc. The company, which has $124 million of cash and equivalents, is scheduled to make a $41.25 million payment on the 2021 notes Nov. 24.

“The fact that they could hold on to their cash is a change of trend,” Torres said by phone from Santiago. “Some people see a light at the end of the tunnel, but there’s still a long way to go.”

Gildemeister announced Aug. 21 that it hired D.F. King, a financial and corporate communications adviser, to help it identify bondholders and improve the flow of information with its investors.

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