Political Risk Latin America Blog @PolRiskLatam

Chile’s Polar struggles amid scandal

Posted in News and Articles, Political Risk by politicalrisklatam on June 24, 2011

by Jude Webber for Financial Times – Beyond Brics, June 22nd, 2011.

A bit of good news at last? The picture at Chile’s fourth-biggest retailer, La Polar, has been unremittingly black in recent days as an unprecedented – and unexpected – credit scandal has snowballed.

A share crash (nearly 80 per cent since June 9) has wiped nearly $1bn off the company, the interim chairman quit this week and the market reckoned the firm was heading for bankruptcy or takeover after it admitted that executives restructured 475bn pesos of overdue credits without telling either the 400,000 customers affected, or the board.

After a wave of dismissals, another 11 executives have been given their marching orders.

But perhaps La Polar can yet be saved, says Francisco Errandonea, an analyst at Santander Investment in Chile.

An extraordinary shareholders’ meeting on Wednesday approved a $212m capital increase after pension funds set strict conditions for their support – including a freezing of the company’s investment plan, a halt to expansion in Colombia and no more executive stock options. Though almost half the company’s original proposal, that will go a long way to keeping the company afloat, Errandonea says. The price for the capital increase will be set at a new shareholders’ meeting, at a date yet to be announced. (continue reading… )

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