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Mexican Retailer Comerci Eyes Restructuring

Source: Reuters
16/10/2008

Mexico City, 16 October - Mexican retailer Comercial Mexicana plans to present a restructuring plan soon, but analysts say the company may have to sell assets to ease creditor pressure.

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Comercial Mexicana, known as Comerci, defaulted on its debt and filed for court protection from creditors last week after disclosing massive losses on bets against the dollar as global markets disintegrated.

Mexico's stock exchange suspended trading in Comerci's shares on Wednesday, saying it had requested information from the company.

Comerci "remains in negotiations with its lenders and hopes to present a restructuring plan in the next weeks," the company said in a statement to the stock exchange. It said it had hired Credit Suisse as financial adviser.

Comerci said it was in talks to obtain financing to meet obligations with clients and suppliers.

"If it's true that Comerci expects its stores to keep running normally, its operating margin has decreased considerably after last week's events," Banamex brokerage said in a report.

"Coordination with suppliers is key to not lag behind in the year-end (sales) season, but the drive shown by (rivals) Walmex and Soriana could be a limitation."

Wal-Mart de Mexico, or Walmex, is the leading retailer in Mexico, followed by Monterrey-based Soriana , which recently purchased nearly 200 stores from a smaller competitor to boost its presence in Mexico. Sluggish retail spending has left the two competing for customers.

Last week Comerci said it would skip debt payments after bad bets on currency hedges sent its net debt ballooning to $2 billion.

Analysts say Comerci could still renegotiate its debt, using its assets as a guarantee. But Actinver brokerage said in a report the company could succumb "to creditors (and) liquidating assets in a staggered or total fashion,"

Comerci could not be reached to comment on the analysts' statements.

Comerci shares closed at 4.51 pesos on Tuesday, 87 percent below its year-high of 35.20 pesos.

The company has become the punching bag of regulators and other market watchers in recent days due to its derivatives trading.

On Tuesday, Central Bank Gov. Guillermo Ortiz said Comerci and other companies had no business making big currency derivatives bets and said bankers had been irresponsible in selling those instruments unsuitable to their profiles.

Comerci officials were not available on Wednesday for comment.



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