IRSA failed to reshape the payment of its debt in dollars

Last May, IRSA Investments and Representations tried reshape the payment from your dollarized debt extending the terms of a series of Negotiable Obligations (ON) that expire in 2023 until 2028.

These are Class 2 bonds at a fixed rate of 8.750% that had originally been issued for US$360 million and that offer to exchange them for Class XIV ONs at a fixed rate of 8.750% maturing within six years.

With this operation, the largest operator of shopping centers in Argentina He is looking for air to be able to cancel that debt while he rebuilds his finances, deeply affected by the economic effects of the sanitary measures taken by the Government to combat the Covid-19 pandemic during 2020 and part of 2021.

However, it had to extend the expiration date for joining the swap until July 6, since initially it did not obtain the endorsement of the creditors necessary to close the transaction.

At least that is what emerges from the report that IRSA sent to the National Securities Commission (CNV) to announce the extension addressed to “eligible” holders to exchange these ONs maturing next year as anticipated in the prospectus and exchange supplement of last May 16.

IRSA operates most of the shopping centers in Argentina

In this sense, the exchange agent chosen by IRSA informed the group that to date the proposal has been accepted by the holders of ON for a little more than US$222 million, a figure that represents the 61.74% of total capital in circulation of the current ON.

Of that amount, creditors for US$129 million and representing 58.31% of the capital opted for Option A offered as payment by IRSA, while the remaining 41.69% (US$92 million) did so. for option B.

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Two variants

In the case of option A, investors who showed up for the swap early they will receive a consideration that varies between US$1,000 and US$1,010.5 (either in cash or a combination of cash and ON) for each US$1,000 of existing capital. The difference depends on the Pro Rata of the Cash Consideration received.

According to the IRSA note where it explains the content of the proposal, in the event that less than 30% of the ON holders are accepted for the exchange, under Option A, the difference between the consideration in total cash and the consideration in Cash A “will be paid to eligible holders whose existing Notes are accepted for Exchange under Option B, Pro Rata of the amount of their existing Notes accepted for exchange under Option B, and proportionally reducing the amount of Notes that make up the Consideration B”.

As for the eligible holders who present ON under Option B, they will only receive cash as part of the consideration B if less than full cash consideration is paid under Option A.

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IRSA did not obtain the endorsement of the necessary creditors to close the operation

Now IRSA adds that in the event that no new bidders have been added after June 28, the holders of Bonds that remain in the exchange under Option A will receive US$514.47 as Pro Rata of the Consideration. in Cash A for each US$1,000 of capital of the ONs that have been offered under Option A. “IRSA expects, on July 8, 2022, which is the second business day after the Expiration Date of the Offer Exchange, issue and deliver the applicable principal amount of the new Notes and deliver the applicable Exchange Consideration in exchange for any of the existing Notes validly offered and not withdrawn and accepted for exchange, in the amount and manner described in the Exchange Supplement. Prospectus and Exchange”, anticipates the holding company directed by Eduardo Elsztain.

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unstable scenario

The strategy of extending the payment terms of part of its debt in dollars is added to the decision of IRSA to protect the shares of your holding company of market fluctuations and instability.

He does it from a plan to repurchase of own shares, copying a financial strategy similar to the one already carried out by important companies listed on the Argentine stock market such as Pampa Energía; Telecom Argentina; Loma Negra and Transportadora de Gas del Sur (TGS), among others.

To take the same path, IRSA took into account the current economic situation and the local markets, as well as the discount that the current listing price of the holding company’s shares has in relation to the fair value of its assets, determined by independent appraisers. .

According to the document sent by the group that owns the main shopping centers in the country to the CNV, current volatility “does not reflect the value or economic reality that the assets have, resulting in the detriment of the interests of the shareholders of the company”.

Based on these arguments, the IRSA board of directors authorized the use of up to $1,000 million for the purchase of the shares with a daily limit for operations in the market that will be no greater than 25% of the average transaction volume that the shares have experienced. in the listed markets, during the previous 90 business days.

As for the price you are paying, it reaches a maximum of US$7 for each ADS and up to $140 per share, with a term for acquisitions of 120 days.

At the end of December of last year, the holding company had issued 658,712,382 ordinary shares with a nominal value of $1 with the right to one vote per share and 152,158,215 shares derived from the capital increase as a result of the merger with IRSA Propiedades Comerciales, which will be issued at the time of the authorization of the public offeringthen totaling a capital of $810,870,597 million.

In this way, the number of shares to be acquired will in no case exceed the maximum limit of 10% of the company’s capital stock, in accordance with the provisions of the applicable regulations.

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