Carsa to default on two notes

Carsa to default on two notes

Bonds Debt Capital Markets Fixed Income Argentina Latin America

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Argentina’s Carsa said it will not be able to make interest payments on two bonds that are due May 31, but the home appliances retailer added that it is hopeful to get back on track after a recent restructuring of the business. 

Carsa, which operates the Musimundo retail chain, did not make the payments on bonds maturing February 28, 2023, according to a securities filing. 

Both of the bonds were issued in early 2019, one for ARS362 million, then the equivalent of $9.5 million, at the local reference rate of Badlar plus 500 basis points. The other was for ARS120 million and pays Badlar plus 650 basis points, according to securities records.

Despite the missed payments, Carsa said it has completed a "deep restructuring process that will allow it to generate the necessary funds to honor its financial commitments." It did not say when it would be able to make the missed payments, however. 

Last October, Carsa ceded 37 of its Red Megatone stores — another home appliances retail chain — to Megatone, its joint partner in Musimundo. Carsa said at the time that the deal helped save it ARS180 million in labor and other costs, helping to improve its profits. 

Even so, Carsa was subsequently hit by a lockdown of the economy imposed this past March 20 to try to contain a spread of the deadly novel coronavirus. While the government has loosened the shutdown, retailers have only been able to partially open stores or sell online, and a full reopening of the economy isn’t likely until after an expected peak of COVID-19 cases hits in June. 

The shutdown has led economists surveyed by the central bank to forecast that the economy will shrink by 7% this year, far worse than the 1% contraction expected before the pandemic. 

This has pushed other companies to default, including Longvie  a maker of ovens, washing machines and other appliances, shoemaker Grimoldi and department store operator Minicuotas Ribeiro.