SAO PAULO, Sept 8 (Reuters) - Brazilian mall operator General Shopping Brasil SA exercised on Tuesday a right to suspend a coupon payment on $150 million of perpetual subordinated bonds due later this month, as a currency slump hammered the company’s ability to service dollar debts.
The São Paulo-based firm had an option to defer the coupon payments due on Sept. 20 under terms of the bonds’ indentures, according to a securities filing. As a result, the payment delay will not constitute a default and should not result in the acceleration of the debt, the filing added.
The 12 percent perpetual bond shed more than 40 cents to the dollar to about 39 cents since July, on concern that a 30 percent plunge in the Brazilian real this year could force the company to miss the coupon payment and instead accrue it to the principal owed to bondholders.
With revenue exclusively in reais but two-thirds of its liabilities tied to the greenback, General Shopping’s dollar debt equaled 7.1 times its earnings before interest, tax, depreciation and amortization at the end of June - the highest in a group of 90 Latin American companies with large dollar debt exposure compiled by Bank of America Merrill Lynch.
According to the filing, General Shopping intends to engage in transactions aimed at reducing the amount of its dollar-denominated debt, including a potential tender offer to buy part of the company’s $250 million worth of 10 percent perpetual bonds.
Fitch Ratings analysts said in a report last month that the so-called debt-to-EBITDA ratio grows by a factor of one every time the real falls 10 percent against the dollar.
General Shopping did not have an immediate comment beyond the filing. (Reporting by Guillermo Parra-Bernal; Editing by Bernard Orr)