What is Cresud’s formula to face the crisis / Argentina News

The agricultural holding company of the Elsztain family and controlling company of IRSA carries out financial and commercial engineering to balance its losses

Cresud, the society through which the Elsztain family is controlling the IRSA real estate group, seeks to rebuild its financial situation and expand its business by refinancing part of its debt and the sale of assets related to it. agro.

It is the main shareholder of the largest real estate developer group in Argentina, with a 55.64% stake that, in turn, distributes its capital between Inversiones Financieras del Sur SA Y Agroinvestment SA, both companies incorporated and domiciled in Uruguay and belonging to the same controlling group.

With losses of $ 9,231 million during the first months of this year, Cresud tries to recover by issuing shares, exchanging Negotiable Obligations (ON) and transferring fields in the country and abroad.

The strategy that the group implemented is divided between the two lines of businesses in which it operates, such as agriculture and livestock and urban properties and investments.

In this case, a few days ago a fraction of 2,440 hectares of its “San Pedro” farm, which includes 1,950 productive hectares of agricultural activity and its historic center, was detached.

The field is located in the Department of Concepción del Uruguay, Entre Ríos, and had been bought by Cresud in 2005 and with its transfer the group pockets US $ 8.6 million and allows a book profit of $ 283 million.

Already at the end of 2020, it had closed a similar operation but abroad. It was when its subsidiary BrasilAgro sold 9,000 agricultural hectares in Bolivia, an operation for which it received fresh funds for US $ 30 million.

BrazilAgro is a public limited company controlled by Cresud, which holds 32.06% of the shares, while the remaining 67.94% is listed on the São Paulo Stock Exchange, Brazil.

The Elsztain group continues to be the largest private shareholder in the Brazilian company, a position that allowed it to launch a public offering of primary and secondary distribution of 20 million new shares.

The operation was carried out in Brazil, under the coordination of the BTG Pactual Bank of XP Investimentos, and simultaneously efforts were made to place shares abroad by BTG Pactual Capital of the United States.

The 20 million shares of the primary offering and 2.7 million for the secondary offering were traded, with a price per share set at 22 reais.

The resources received in the primary offering represent an increase of 440 million reais in the company’s capital stock, which will increase to 1,139 million reais.

The funds were used to acquire assets, land for exploration and development of agricultural properties, and businesses to optimize and leverage operating activities.

Cresud has a presence in agriculture at the regional level.

A similar scheme used in its own capital for example, on February 17, when it announced the launch of a public offering for up to 90 million shares (or the equivalent of 9 million ADS) and 90 million to subscribe for new ordinary shares.

For each share or ADS, it offered to subscribe 0.17 new ordinary shares and receive an option free of charge with the right to subscribe one additional ordinary share in the future. The subscription price was $ 70.31 or $ 0.472 and for the ADS it was $ 4.72.

At the time, spokespersons for the group explained that the strategy seeks to strengthen its financial position to take advantage of the opportunities that arise.

Regional diversification

Through a note sent to the National Securities Commission (CNV), the CEO of Cresud, Alejandro Elsztain, remarked that Thanks to the operation, the organization becomes the first Argentine company to enter the equity market -local and international- since 2017.

“The company continues to bet on agriculture in Argentina with a track record of 85 years operating in the country and diversifying its regional portfolio -process that began in 2006- with the purchase and operation of fields in Brazil, Paraguay and Bolivia”, added the executive in the letter.

In this scheme, Cresud’s own shareholders subscribed under the pre-emptive right just over 87 million new shares. That is, 97% of the shares offered, and they requested to buy another 26 million, thus completing the issuance of all the 90 million offered.

Likewise, it issued 90 million options so that its holders can buy the same number of new shares with a price of US $ 0.566. For the operation, Cresud received US $ 42.5 million and issued the new shares, increasing the capital stock to $ 591,642,804 million.

Then, on April 12, it launched another public offering for up to 80 million shares and another 80 million options to subscribe for new common shares.

The announcement allowed each holder to subscribe 0.1 new ordinary shares and receive an option with the right to subscribe one additional ordinary share in the future at no charge. The subscription price was $ 58.35 or $ 0.36 and for the new GDS it was $ 3.60.

In this case, Cresud shareholders subscribed 79.1 million new shares, or 99% of what was offered, and requested another 15.4 million. Once the capital increase is completed, it will allow you to obtain additional funds for US $ 28.8 million.

Uncertain outlook

This process continued during June, when the exchange of ONs began to comply with Communication “A” 7272 of the Central Bank, which obliges companies to restructure at least 60% of the principal maturities of their debts with a term of two years of average life. It did so by offering to exchange Class XXV securities for US $ 59.5 million, at a fixed nominal annual interest rate of 9% that expire on July 11.

The expiration period to sign up for the exchange is June 28 and those who enter will receive, among other offers, a sum of money for repayment, in cash and in dollars that will be equivalent to at least 40% of the capital. of the existing NOs.

Eduardo Elsztain's family is the majority shareholder of Cresud, the controlling group of IRSA

Eduardo Elsztain’s family is the majority shareholder of Cresud, the controlling group of IRSA

The new Class XXXIII NO will pay a fixed nominal annual interest rate of 9%, with maturity three years from the date of issuance and settlement, with annual amortizations of 33%, 33% and 34%, respectively, denominated and payable in dollars for up to a face value of $ 3.7 million.

Despite all these measures and plans, For Cresud shareholders, the final scope of the coronavirus outbreak and its impact on the country’s economy and its businesses is still uncertain and has produced significant short-term effects.

However, they estimate that the crisis scenario will not affect business continuity and the group’s ability to meet its financial commitments for the next 12 months.

In this sense, they assure that they are “closely monitoring the situation and taking all necessary measures to preserve human life and the group’s businesses.”