May 20, 2019 / 5:20 PM / 10 months ago

Spanish retailer DIA strikes rescue deal with banks

MADRID (Reuters) - Struggling Spanish retailer DIA reached an eleventh-hour agreement to secure financing on Monday, new owner LetterOne said in a statement, staving off the imminent risk of having to start insolvency proceedings.

FILE PHOTO: People walk outside a DIA supermarket in central Madrid, Spain, February 23, 2015. REUTERS/Juan Medina/File Photo

DIA’s failure to compete with domestic and foreign rivals that have invested more heavily in their stores has hit the company’s market share and left it with negative equity and towering debt.

The group’s principal creditor, Santander, reached a deal with DIA’s new owner, Russian tycoon Mikhail Fridman’s LetterOne (L1) fund, with hours to go before a midnight deadline, a source with knowledge of the matter said.

Santander Chairman Ana Botin said on Twitter that Fridman had committed to work on changing a proposal that she had said earlier in the day was more generous to foreign bondholders than Spanish banks.

“We believe (this) is the fair thing to do,” Botin said. “Santander will continue to act responsibly in supporting DIA and its employees.”

DIA declined to comment immediately. Santander declined to comment further on Botin’s tweet.

Santander holds the lion’s share of the supermarket group’s bank debt. Negotiating an extension to this was a condition of Fridman’s plan for DIA, the next step of which will be a capital raising.

The other 16 holders of DIA’s bank debt had already agreed to roll over the existing financing, L1 said last week. Failure to convince the holdout bank, which L1 did not name, could have scuppered the plan.

Botin said earlier she had defended her bank’s own shareholders in the negotiation, in which L1 was asking banks to extend debt agreements until 2023 and set up new credit lines for 170 million euros ($190 million).

Fridman had said holders of bonds due to mature in July would be repaid in full with the proceeds of the capital hike.

Botin said on Twitter that Fridman had “committed to work to eliminate discrimination between DIA’s bondholders and lenders, which we believe is the right thing to do.”

The yield on DIA’s bonds maturing in July had risen 7.6 percent by the end of Monday’s trading session.

Last week DIA reported losses of 144.4 million euros for January-March.

The supermarket chain has 1.7 billion euros in debt.

Additional reporting by Andres Gonzalez; Editing by Ingrid Melander, Mark Potter and David Evans

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