Famsa files for Chapter 11 protection

Famsa files for Chapter 11 protection

Debt Capital Markets Corporate & Sovereign Strategy Fixed Income Regulation Mexico US

Editor's note: LatinFinance is making some of its most important coronavirus-related material available to all readers. Visit our coronavirus section for all our coverage and sign up to receive the Daily Brief newsletter in your inbox every morning.

Mexico's Grupo Famsa said Friday that it filed for Chapter 11 bankruptcy protection in the United States to restructure its 7.25% 2020 bonds, following a missed debt payment earlier this month.

"Famsa will continue operating in the ordinary course of business without any interruption to its operations and the valuable relationships that the company maintains with its customers, suppliers and creditors," the Mexico City-based retail group said in a securities filing.

The Chapter 11 filing only involves Famsa's 2020 notes. The group will continue to service its other debts and make payments to suppliers with cash on hand and expected earnings, it said in the statement.

Bondholders with 96% of the outstanding 2020 notes, equal to $48.6 million in principal, agreed to the restructuring plans under Chapter 11, CEO Humberto Garza Valdéz said in the statement.

Famsa has $59.1 million in outstanding 2020 notes, but it missed a scheduled interest payment on June 1. Under the restructuring, the company offered to swap the old notes for the same amount in new 10.25% 2023 bonds plus $10 in cash for every $1,000 in 2020 bonds, or an equal amount in new 9.75% 2024 bonds.

S&P Global Ratings and Fitch Ratings both viewed the proposed exchange as an effective default by Famsa.

Shares in Famsa dropped 4.4% on Friday to close the week at MXN1.74 ($0.08).