Grimoldi reaches restructuring deal with bondholders

Grimoldi reaches restructuring deal with bondholders

Debt Bonds Capital Markets Fixed Income Coronavirus Argentina

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Argentine shoemaker and retailer Grimoldi said on Thursday that it has reached a deal with bondholders to restructure debts it defaulted on earlier this year, even as a coronavirus-induced lockdown of the economy reduces sales.

The company, which markets brands like Hush Puppies, Timberland and Vans at more than 100 stores in Argentina, said holders of its defaulted bonds voted unanimously in favor of the proposal at a meeting on May 20, according to a securities filing.

The agreement paves the way for Grimoldi to modify the terms of ARS250 million in peso-denominated bonds issued in 2017 — then worth around $14 million, but now worth $3.66 million. On April 30, Grimoldi failed to make an ARS7.39 million interest payment on the bonds, which pay 519 basis points over Badlar and mature at the end of July this year.

As part of the restructuring deal, Grimoldi said it will capitalize the unpaid interest as well as the interest to be paid at maturity. The total amount of interest — ARS90.7 million — will be paid in six installments over a two-year period that starts on July 31, with the first capital payment due after 14 months.

The interest on the capital, however, will be paid bimonthly at Badlar plus 650 basis points. Badlar, a local reference rate, stands at roughly 26%.

As part of the agreement, the retailer said it will limit taking on new debt and not pay shareholder dividends in cash until the bond is paid off in full. With the first payment of principal not due for 14 months, the deal is structured to give the company time to rebuild its finances.

Like most retailers, Grimoldi saw its sales plunge after the government shut down the economy on March 20, an order that has been extended to June 7 and is expected to drag on for longer as the number of confirmed COVID-19 cases continues to rise. The government has said it expects to reach a peak in cases in June.

The lockdown is pushing the country deeper into recession. According to a survey published by the central bank at the start of May, most economists expect GDP to shrink 7% this year, far more than a previously expected decline of 1% and the worst since a 10.9% contraction in 2002.

The recession, now in its third year, has pushed more companies to default, including home appliances retailer Carsa and manufacturer Longvie. On Wednesday, department store Ribeiro said it defaulted on two more bonds this week, but added that it is seeking to restructure all of its debt payments due this year.