General Shopping defers debt payment, eyes tender
By Paul Kilby
NEW YORK, Sept 8 (IFR) - Brazilian mall operator General Shopping on Tuesday said it was deferring payments on US$150m of 12% perpetual bonds, triggering covenants that allow it take such an action.
In a statement the company said its move to defer payment that is due on September 20 did not constitute a default. It however did not specify why it was taking such a step.
"They have a right to do this," said Klaus Spielkamp, head of fixed-income sales at Bulltick. "The market was expecting this and it wasn't a surprise to anyone."
The move follows a sharp dip in the prices of the perps which were quoted as low as 20-30 on Tuesday.
The prices fell amid concerns that a weakening Real would make it difficult for the company to meet dollar payments when it was largely generating local currency revenues.
The non-call five perp is just one of a handful of hybrid securities issued by Latin America corporates in recent years.
The deal, which was granted 50% equity treatment by rating agencies when it was issued in 2012, allowed the company to lower its leverage ratios while proceeding with aggressive expansion plans.
Meanwhile, the company is looking to reduce the amount outstanding dollar denominated debt on its balance sheet, announcing today that it may tender for some US$250m in outstanding senior 10% perps.
The tender will depend on the company's ability to raise funding. Management is considering various options, including debt and equity sales in the local market, local currency loans or asset sales, it said.
The 10% senior perps were trading in the low to mid 50s on Tuesday. "At those levels, the market is saying you may not be making payments on the sub debt but the senior debt is a different story," said an investor. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)
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