Shares of Brazil's Casas Bahia jump over 30% on debt restructuring plan

A Sao Paulo court approved the retailer's out-of-court debt restructuring plan on Monday evening, the company told Reuters, confirming an earlier report by O Globo newspaper. "The measure provides important leeway for Casas Bahia's short- and medium-term cash flows and, to a certain extent, reduces the risks of liquidity concerns," Bradesco BBI analysts said in a note to clients, calling the move "very positive".

Shares in Brazilian retailer Casas Bahia soared on Monday after the firm unveiled an agreement to restructure 4.1 billion reais ($801.45 million) in debt, extending the average maturity of its obligations to 72 months from 22 months.

The retailer, which controls the Casas Bahia and Ponto brands and also has large e-commerce operations, was the biggest gainer on Brazil's Bovespa stock index, jumping 34%higher while the benchmark index rose 0.65%. The firm's shares also closed in the highest level in more than a month, at 7.30 reais each.

The out-of-court debt restructuring, which was announced late on Sunday, is expected to improve the company's cash flow by 4.3 billion reais in the next four years, it said. A Sao Paulo court approved the retailer's out-of-court debt restructuring plan on Monday evening, the company told Reuters, confirming an earlier report by O Globo newspaper.

"The measure provides important leeway for Casas Bahia's short- and medium-term cash flows and, to a certain extent, reduces the risks of liquidity concerns," Bradesco BBI analysts said in a note to clients, calling the move "very positive". "We believe that the company's management can now have a greater focus and make a greater effort in executing its transformation plan without the distraction of significant cash disbursements in the short term," they added.

Analysts at Safra also viewed the news as positive, but noted that total interest payment would rise substantially to 2.397 billion reais from 971 million reais previously, which would impact future cash flow. Casas Bahia, formerly known as Via, had already announced last year a series of restructuring measures that also included shrinking inventories, closing stores, and laying off thousands of workers.

Year-to-date, Casas Bahia's shares are still down some 36%. ($1 = 5.1157 reais)

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