Bloomberg News

La Polar Plunges After Chairman Calls Past Profits ‘Fake’

October 28, 2011

(Updates with closing share price.)

Oct. 28 (Bloomberg) -- Empresas La Polar SA, the Chilean department store operator that is trying to avert its second bankruptcy in 12 years, plunged after it unveiled revised financial statements and its chairman said that figures it sent to regulators in the past were “fake.”

La Polar tumbled 12 percent to 325.74 pesos at the close of trading in Santiago, the steepest one-day drop since July 1. Shares earlier plunged 21 percent to a record low 289 pesos. Trading had been suspended until 12 p.m. today after the company filed its financial statement to Chilean regulators yesterday.

In the filing, La Polar said that as of July 31 it had total liabilities of 559 billion pesos ($1.14 billion), which include 493 billion pesos of debt. The company said it also has negative equity of 218 billion pesos. Total assets were 341 billion pesos. La Polar also had a loss in the first seven months of the year of 409 billion pesos, the statement said.

“It’s the biggest cover-up in a company ever in Chile,” Chairman Cesar Barros, who took his post in June, told reporters yesterday. “It never had profits, and the profits it showed were fake.”

His comments were reported today by newspaper Diario Financiero. Paula Mackenzie, a spokeswoman at Extend Comunicaciones, La Polar’s external communications office, said the report was accurate.

“As it is, it’s not viable at all,” Francisco Obilinovic, an analyst at Banco Penta, said in a phone interview from Santiago. “It requires a complete revamp of its operations and the willingness of shareholders and creditors to take losses.”

Creditor Meeting

La Polar has called a meeting with creditors for Nov. 7 to vote on a preventive judicial agreement to avoid declaring bankruptcy. After that, the company plans to ask stockholders to approve a sale of $200 million in new shares to finance operations, the statement said.

La Polar also intends to close nine underperforming stores in Chile between this year and next, and open seven new ones by 2014, according to a presentation with the company’s business plan that was also posted on the website of the country’s securities regulator.

In Colombia, where La Polar currently operates four stores, plans are to grow to 15 locations by 2014.

La Polar unveiled in June that it had unilaterally modified consumer loan terms for approximately one million customers as a way to reduce provisions and increase earnings. The price of its stock has fallen 91 percent in the year to date.

--Editors: Marie-France Han, Richard Richtmyer

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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