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It was first in March. Then in September. This has not been the year for the bondholders of Corp Group Banking, Álvaro Saieh’s company in which Itaú bank participates.
Against time and without much space to negotiate. This is the Saieh group these days, where in Santiago and New York they devise plans and alternatives to offer the creditors of Corp Group Banking (CGB), who, for the second time this year, see how the payment of a maturity of interest on the bond for US $ 500 million that they raised in 2013 is complicated.
Already in March CGB delayed the payment of about US $ 17 million twice. Then, the low flow generated by Itaú, the main generator of resources of this company, was syndicated as the reason. But by the second due of the year, on September 15, the Saieh group simply did not pay. And a period of one month was given to look for alternatives. This time, in addition to warning Wall Street that he would not pay and that he had serious liquidity problems, he shielded himself and hired high-caliber lawyers and advisers: the Carey law firm in Chile, the US law firm Simpson Thacher & Bartlett and the bank of Lazard investment.
October 15 is CGB’s deadline. The options have been repeated these days in the press: ask to postpone the payment of the entire bond, make a “deduction”, ask for a lower rate or even worse, qualify for Chapter 11 in the United States. The problem is that to convince the creditors you have to offer something in return. And he has little financial room for maneuver.
A month ago Lazard took up the issue, and several creditors comment that, as of press time, they have not received any information. “Everything indicates that he will present his plan on the 14th and will try to force us to accept it. But we are organized and we are not going to take any crumbs, ”warns a bondholder.
The eyes of the CMF above
But there is another edge that has not only Saieh nervous. In Sao Paulo, the shareholders of Itaú Unibanco, partners of the Chilean businessman since 2014, and today controllers of the bank in Chile, have two open fronts in this case.
First, they are creditors of some US $ 1.1 billion that they loaned to Saieh in 2014, and a good part of the guarantees of that loan are leveraged in shares of the same Chilean bank, in addition to the Colombian subsidiary.
The problem is that the CGB bond is also guaranteed Itaú shares. And making the sums quick, Saieh owes $ 1.6 billion, and her current 26% in the bank reaches $ 300 million. They don’t give the numbers.
But today, the biggest concern is regulatory. According to article 28 of the General Banking Law, the founding or controlling shareholders of a bank cannot default without affecting the stability of the entity.
“The solvency requirement must be met permanently by the shareholders who are considered bank controllers (…) and will consist of having, individually or jointly, a consolidated net worth equal, in the proportion that corresponds to them, to the basic bank capital”Reads the article.
But there is more. “If the requirement indicated in the previous paragraph is not complied with for a period greater than that determined by the Commission for its regularization, it will be presumed (…) the occurrence of serious events that make fear for the financial stability of the bank” .
High sources indicate that the CMF has not yet initiated an investigation, but if Saieh does not pay on October 15, they could fall hard to audit. And that occupies and worries Brazilians.
São Paulo lifeguard? No thanks
The relationship with his Brazilian partners, although not severed and they talk often, is not going through the best of times and the conversations have been incessant to find out what Saieh will do with his debts. Buying his stake today does not make much sense for Brazilians, both because their own affairs in Brazil already need heavy investments, and because, in practice, Saieh’s shares, as they are guaranteed in loans, are not 100% of him.
“In the current conditions, and with the challenges we already have in Brazil, which are not small due to capital or other issues, we do not think it is the minute, nor is there any conversation in order to increase our ownership in the bank local”said this week Milthon Maluhy, CFO of Itaú Unibanco, and former CEO of the Chilean operation in a meeting held by BTG.
And going back to the regulatory front, we must add that the bank will have to be capitalized at about US $ 500 million to meet Basel III standards, and Saieh, as a shareholder, has to put fresh money out of his pocket.
In any case, those familiar with the subject recall that the origin of the non-payment problems is that the bank has not given the expected results, even below the industry. And there, the card that Saieh plays is that he cannot make decisions without bowing to the controller – according to the very same shareholders’ agreement with the Brazilians – and the bank’s daily management decisions are entirely made by Brazilians. The last manager to propose the Saieh group was Manuel Olivares, who left management in January of this year.
The role of the son
At the beginning of the year, the businessman announced his retirement from day-to-day business, and gave the place to his son, Jorge Andrés Saieh. And the retreat was real. According to a friend of the businessman, “Álvaro doesn’t want any more war, he trusts too much in how professional Jorge Andrés is, so he broke up”. Another close to the businessman clarifies: “Jorge Andrés is not Álvaro. When you negotiated with the father directly, it was something else, he had a talent for making you feel that he was yielding, but in the end nothing was yielding and everyone stood happily at the table ”.
In fact, Corp Group creditors who have tried to speak to Álvaro Saieh directly, reveal that the businessman is not looking at the issue and that everything derives directly to the son. “I retired,” he answers the phone.
Connoisseurs of the process also tell that Jorge Andrés Saieh has been on top of every detail of the devising of a plan to convince creditors. Likewise, he has also been emphatic that this is a problem that concerns only Corp Group, whose flows and guarantees are given by the bank in Chile and Colombia, so it is not a problem of the family holding company. Neither SMU, nor Vivo Corp, nor the family’s personal assets are in the equation.
Among creditors they believe that could change, if the trouble is such that they have to put other assets on the table. And, the bondholders themselves say, it is better to do it amicably than through the courts. If this reaches Chilean or US courts, they can try to go upstream in Saieh’s other companies or investments.
Another actor in the market warns that Jorge Andrés Saieh himself, president of the bank and in charge of Copesa, editor of media such as La Tercera, La Cuarta and Radio Duna, is the visible face of this entire process.
You may also be interested: The seven letters from CorpGroup to negotiate the restructuring of your debt
Saieh pay, always
In any case, there is a certain tranquility in the group of creditors. They know who they are dealing with and they know their reputation. Álvaro Saieh has always been very leveraged in his businesses, he has had problems paying on other occasions, but he always shows his face and puts money on the table to pay off his obligations.
Several recall that in 2013, when SMU went into a spiral of financial problems, the businessman put his two insurance companies up for sale and it was ILC that bought them for US $ 165 million.
The problem, they say in the market, is that today the asset situation of the family group is different. Vivo Corp is going through complex moments after the social outbreak and pandemic and the health and movement restrictions that have been implemented. In addition, it has already sold part of its assets to Grupo Patio. SMU, so far, has been the only subsidiary of the group that has given flow in these months, and Saieh would not be willing to give up control, which he maintains for just tenths of a stake. Furthermore, it is not very clear who would be willing to buy that asset.
And the main change in his financial situation compared to seven years ago is that he no longer controls the bank. Having a bank, says a market actor, always gives greater room for maneuver vis-à-vis other creditors.
Today, the Saieh group looks for all the cards on the table to stop the bad moment. Starting tomorrow, you have 11 days left to offer something in return. The problem, adds an insider, is that the next debt coupon will expire in March of the next year, and nothing predicts that the bank will generate the flows that Corp Group needs by that date.
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