Bloomberg News

Holders of Two-Thirds of La Polar Bonds Back Debt Plan

November 04, 2011

(Updates with comment from chairman in third and fourth paragraphs.)

Nov. 4 (Bloomberg) -- Holders of Empresas La Polar SA series A and B bonds agreed to back a debt restructuring plan that aims to avert the department store operator’s second bankruptcy in 12 years, said Nelson Contador, a legal adviser to the company.

All of La Polar’s creditors will vote on the plan on Nov. 7, Contador told reporters during a meeting of bondholders today.

Debt will be divided into two parts, La Polar chairman Cesar Barros told reporters at the same meeting. One part, representing 44 percent of debt, will be repackaged into a 10- year bond with a three to four-year grace period and an 8 percent average interest rate. The rest will be wrapped into a bond with zero interest and adjusted for inflation to be paid in 2032, he said.

“We are optimistic that it will be approved and we see La Polar’s future favorably,” Barros said. The A and B bonds represent two-thirds of the company’s bondholders, he said.

The terms of the accord were presented by La Polar’s management to enable it to continue operating and move ahead with the sale of 120 billion pesos ($242 million) in new shares, he said.

As of July 31, La Polar had total debt of 540 billion pesos ($1.1 billion), of which bonds corresponded to 262 billion pesos, according to a report that the company posted Oct. 27 on the website of Chile’s securities regulator.

The agreement will allow creditors to recover a larger amount of the company’s debt than in a bankruptcy, Andres Sepulveda, a lawyer from firm Gutierrez & Silva Abogados, said in an interview today in Santiago.

Legal firm Gutierrez & Silva revealed financial irregularities in La Polar to regulators in a study on June 2. La Polar then announced June 9 it would set aside additional provisions of between 150 billion pesos and 200 billion pesos after unilaterally changing the terms of consumer loans to about 1 million clients.

La Polar announced today that in the first seven months of the year it posted a net loss of 573 billion pesos on revenue of 277 billion pesos.

--Editors: Philip Sanders, Jonathan Roeder

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

To contact the editor responsible for this story: Philip Sanders at psanders@bloomberg.net.


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