Leading Argentine textile manufacturer Alpargatas SAIC has launched an aggressive restructuring offer that calls for a haircut of nearly 90% on about $600 million in debt.
Shares of Alpargatas, which mostly makes denim and also produces a top-selling line of athletic footwear in Argentina, soared 12.9% on Thursday after the company presented its debt restructuring proposal to an Argentine bankruptcy judge. Terms of the offer were also detailed in a filing to the Buenos Aires stock exchange. At 1645 GMT Friday, Alpargatas was up a further 3.8% to ARS2.99 with about half a million shares traded. The General Index was 0.54% higher.
The textile company filed for the local equivalent of Chapter 11 bankruptcy in December 2001, joining the flood of Argentine firms that were also unable to meet their financial obligations amid the country's economic meltdown.
Analysts say Alpargatas' debt restructuring offer amounts to a reduction of between 85% and 90%. This is more severe than Argentine oil and entertainment group Sociedad Comercial del Plata, which earlier this month proposed repayment terms amounting to an 80% haircut on $110 in debt - the harshest restructuring yet among Argentine companies.
Alpargatas' debt burden of $600 million is also heavier than that of some much larger firms such as steelmaker Acindar, which is seeking to restructure $230 million, and natural gas distributor Metrogas, with $440 million.
Alpargatas' debt restructuring plan has two stages. In the first part, $500 million debt will be converted into pesos at a rate of one to one. At the current exchange rate of ARS2.8875 to the dollar, this is an immediate reduction of about 65% before creditors even swap their old holdings for new ones. The remaining debt is denominated in pesos and amounts to about ARS313 million, putting the total peso amount to be restructured at ARS813 million.
Creditors can then choose from four options. The first is a peso-denominated par bond that comes due in 25 years, with capital payments starting in the 11th year and a step-up coupon that starts paying out in the third year. By the bond's last year, the interest rate will be 3%. This first offering will be the default option for creditors that don't register a formal decision.
The second option is a 15-year, peso-denominated bond with a 50% nominal haircut. Capital payments begin in the sixth year and interest payments, which will progressively increase up to 3%, start in the first year.
The third choice carries a total reduction of 75%. Creditors will receive a cash payment worth 7% of the original value of their holdings, plus a 15-year, peso-denominated bond worth 18% of face value of the old obligations. Capital payments begin in the 11th year and the bonds don't pay interest. Alpargatas set a limit of ARS50 million for this option. If the number of creditors choosing this component exceeds that amount, those who don't indicate a back-up choice will be automatically given the fourth option.
The fourth and final part of the proposal allows creditors to swap 80% worth of their original holdings for Alpargatas' ordinary shares at ARS12 each. The company's shares are currently trading at roughly one-fourth of that value.
In its statement, Alpargatas didn't indicate when it expects all necessary creditor and legal approvals for its offer to be concluded.
March 24, 2004