Longvie defaults as lockdown cuts revenue

Longvie defaults as lockdown cuts revenue

Asset Management Bonds Debt Capital Markets Fixed Income Funds Coronavirus Argentina Latin America

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Argentine home appliances manufacturer Longvie said it will not make a ARS18.7 million ($279,000) bond payment scheduled for Thursday, becoming another company to default on its debt as the COVID-19 lockdown slashes revenues and makes it harder to find ways to keep afloat. 

Longvie, which makes ovens, washing machines and other appliances, said it was due to pay ARS13.4 million in interest and ARS4.95 million in principal on a ARS224 million bond that it issued in October 2017 as part of a $20 million bond program, according to a securities filing. 

The company said the lockdown, which began March 20 and is due to end May 10, or possibly later, has led to an "almost absolute paralysis" of its distribution and sales channels, a temporary closure of its three plants and a disruption in payments. The retail outlets that sell its products have also closed their shops, as the government has limited commerce and ordered most people to stay home, Longvie added. 

While some retailers have sold products online, Longvie said online sales have not provided enough revenue for it to stay on top of its debt payments. 

Longvie has called for a meeting of bondholders on May 22 to present alternatives to paying the bonds by capitalizing the missed interest and paying them when the notes mature in November 2021. 

Longvie has had financial problems since 2018, when it had to reach a deal with bondholders after a default. It went on last year to restructure some $200 million in loans with banks, using one of its plants as a guarantee. 

Longvie is not alone. Shoemaker and retailer Grimoldi defaulted on a ARS7.39 million interest payment on a 2020 bond on April 30, raising concerns it may default on the ARS83.3 million in outstanding principal due at maturity at the end of July. Department store operator Minicuotas Ribeiro has defaulted on bonds, while a number of oil companies like Echo Energy and Medanito have also missed payments. 

Other companies are trying to find solutions before missing payments. On Tuesday, Morixe Hermanos, one of the country's largest food companies, said it borrowed $1.6 million from Ignacio Noel, its chairman and leading shareholder, and obtained ARS260 million in new lines of credit from a number of unnamed banks. The financing is for six to 18 months at interest rates of 19% to 24%, it said in a securities filing. 

Morixe said it is using the financing to increase its wheat stocks to prepare for a rebound in demand, which has tanked during the shutdown. In April, the first full month of the shutdown, Morixe said its sales of breadcrumbs and batter dropped 49% on the year, while flour fell 135% and polenta tumbled 579%.