SANTIAGO, Chile, June 17, 2013 /PRNewswire/ -- Cencosud (NYSE: CNCO, BCS: CENCOSUD) a leading South American retailer with operations in Chile, Argentina, Brazil, Peru and Colombia, today announced it has signed a binding MOU with Itau Unibanco Holding S.A. (Itau) to jointly develop the financial retail business in Chile and Argentina.
Under the terms of the agreement, Itau Chile will acquire 51% of the shares of Cencosud Administradora de Tarjetas (CAT), Cencosud's credit card operator in Chile. In Argentina, Cencosud will create a new entity, in which Itau Argentina will contribute with equity, to jointly develop the business.
Additionally, in both countries Itau will provide funding to finance 100% of the current credit portfolio and future growth.
Business Partnership Structure
The agreement signed today includes all the conditions for the establishment of the new partnership. During the next 90 days, the parties will work to translate these terms into the respective contracts. The final contracts are subject to approval from the regulators both in Chile, Brazil and Argentina.
This partnership is aligned with the long-term strategic plan of Cencosud, which aims to enhance the financial services and value proposal offered to Cencosud's clients without the need to devote internal resources, replicating the successful business model currently operating in Brazil and Colombia.
The agreement permits Cencosud to add the know-how and risk management from Itau, the largest bank in Latin-America, allowing our customers to maintain their current benefits along with a wider offering of financial products, higher service quality and deeper access to credit.
The Transaction in Figures
Cencosud will receive a total up-front cash payment of approximately USD$ 1,580 million, of which USD$ 280 million will be from the sale of 51% share of CAT and USD$ 1,300 million in the form of payment of the credit card portfolio funding[1].
- The term of the agreement is 15 years
- Chile
- Purchase of 51% of the shares of CAT by Itau Chile for approximately USD$ 280 million.
- After 15 years, an incremental purchase price adjustment will be calculated upon achievement of business targets.
- Argentina
- Cencosud will create a new entity with approximately USD$7 million in equity
- Itau Argentina will contribute with approximately USD$ 27 million in the form of capital increase, ending with a 51% ownership
- After 5 years a purchase price adjustment will be calculated upon business targets.
- In addition, Itau will fund 100% of the portfolio in both countries for around USD$ 1,300 million, currently funded by Cencosud.
Benefits of the Transactions
- Initial cash inflow of approximately USD$ 1,580 million that will be used to strength Cencosud's balance sheet; of which approximately USD$400 million will be used to reduce Banco Paris liabilities. We expect that with the transaction the Company will reach stronger financial ratios in line with Cencosud's commitment to investment grade.
- The following pro-forma figures show a simulated scenario in which the transaction would be executed today and the use of proceeds would be used to reduce debt.
- 100% reduction of Argentina´s financial debt of approximately USD 180 million, with the funds received locally for the portfolio currently funded by Cencosud
- Approximately USD 400 million to pay down Banco Paris debt
- Approximately USD 1,000 to reduce other Cencosud's liabilities
Pro-forma Amortization Schedule
2013 | 22 |
2014 | 59 |
2015 | 316 |
2016 | 198 |
2017 | 215 |
2018 | 238 |
2019 | 36 |
2020 | 36 |
2021 | 816 |
2022 | 76 |
2023 | 1277 |
2024 | 95 |
2025 | 113 |
2026 | 114 |
2027 | 98 |
2028 | 264 |
2029 | 47 |
2030 | 17 |
2031 | 108 |
- The proforma duration would increase from 5.98 years to 6.9 years
- The financial costs of Cencosud would be reduced versus the previous years
- Leverage of the Company would decrease from 3.7x at March 2013 to 2.7x (proforma as of June 30, 2013).
The Financial Retail Service in Chile and Argentina
Figures as of March 31st 2013 | Chile | Argentina |
Revenues LTM | USD 460 MM | USD 88 MM |
EBITDA LTM | USD 96 MM | USD 30 MM |
Gross Loan portfolio (exc. Banco Paris) | USD 909 MM | USD 277 MM |
Provision / loan portfolio | 7.9% | 5.4% |
Net write-off / loans | 10.1% | 0.6% |
Monthly statements of accounts | 1,698 k | 620 k |
Total credit card issues | 2,100 k | 963 k |
Covenants
Cencosud has 6 bank loans and 11 series of local bonds with CAT change of ownership clauses. After signature of the final agreement the Company will summon bondholder meetings and will discuss with banks to resolve this situation.
Due Day | Currency | Interest Rate | Amount | Amount in CLP | |
New BBVA CAT 2010 | 02-Aug-15 | $ | TAB 180 + 0.35% | 34,819,697,369 | 34,819,697,369 |
Itau 2010 Bretas 1 | 07-Oct-14 | $ | TAB 180 + 0.45% | 25,000,000,000 | 25,000,000,000 |
BBVA $70 MM 2010 | 07-Sep-17 | $ | TAB 180 + 0.40% | 70,000,000,000 | 70,000,000,000 |
BICE $19 MM 2010 | 14-Sep-16 | $ | TAB 180 + 0.60% | 19,000,000,000 | 19,000,000,000 |
RABOBANK USD 50 2010 | 04-Oct-18 | USD | Fixed 3.86% | 50,000,000 | 23,369,000,000 |
Scotia usd100 2010 | 21-Oct-17 | USD | LIBOR 180 + 1.5% | 100,000,000 | 46,738,000,009 |
Bank | 218,926,697,378 | ||||
B cenc A | 15-Mar-27 | UF | UF + 4.25% | 4,000,000 | 91,504,040,000 |
B cenc C | 01-Jul-27 | UF | UF + 4.1% | 4,500,000 | 102,942,045,000 |
B cenc D | 03-Jul-28 | UF | UF + 4% | 1,500,000 | 34,314,015,000 |
B cenc E | 07-May-18 | UF | UF + 3.5% | 2,000,000 | 45,752,020,000 |
B cenc F | 08-May-28 | UF | UF + 4% | 4,500,000 | 102,942,045,000 |
B cenc J | 15-Oct-29 | UF | UF + 5.7% | 3,000,000 | 68,628,030,000 |
B cenc K | 01-Mar-14 | $ | 7% | 30,000,000,000 | 30,000,000,000 |
B cenc L | 28-May-15 | UF | UF + 4.1% | 1,000,000 | 22,876,010,000 |
B cenc N | 28-May-30 | UF | UF + 4.7% | 4,500,000 | 102,942,045,000 |
B cenc O | 01-Jun-31 | $ | Fixed 7.4% | 54,000,000,000 | 54,000,000,000 |
Series J bonds B1 & B2 | 01-Sep-26 | UF | UF + 6.5% | 2,166,245 | 49,555,043,197 |
Bonds | 1,958,436,421 | 705,455,293,197 |
Proforma Guidance
The Company does not expect that 2013 figures will materially change versus the guidance provided by Cencosud in February 2013 because of this transaction.
All the figures mentioned above are based upon current portfolio. Final figures will be determined on the portfolio at the date of closing (after the approvals from the regulatory entities in Chile, Argentina and Brazil).
About Cencosud
Cencosud is a leading multi-brand retailer in South America, headquartered in Chile and with operations in Chile, Brazil, Argentina, Peru and Colombia. The company operates in supermarkets, home improvement stores, shopping centers and department stores, always aiming to deliver the right product at the right price to Latin America's growing middle class. In 2012, the Company listed American Depositary Receipts (ADRs) on the New York Stock Exchange.
Investor Relations
Marisol Fernandez Leon Natalia Nacif
IR Manager IR Analyst
Phone +562 2959 0545 + 562 2959 0368
Email ir@cencosud.cl
Website www.cencosud.com
[1] All the figures mentioned above are based upon current portfolio. Final figures will be determined on the portfolio at the date of closing (after the approvals from the regulatory entities in Chile, Argentina and Brazil).
SOURCE Cencosud
