The CAP Group is evaluating the sale of non-essential assets to raise US$40 million, amid strong financial pressure that for years has driven the company to seek mechanisms to reduce its debt. In this scenario, deleveraging is the company's first objective. To that end, CAP has been negotiating with banks for months on three new refinancing structures to extend the terms of its current debt and strengthen its financial position, said CAP Group CEO Nicolás Burr in Thursday's conference call. He stated that they are "looking at other recovery measures, such as the sale of non-essential assets, which aims to raise on the order of US$40 million. We are also very focused on working capital. We have freed up a considerable amount of money since the beginning of the year. CAP extended a US$30 million line, and in the context of this debt renegotiation, the appropriate amount is being determined after this restructuring. It is part of the negotiation with the banks."
Regarding cash, Felipe Gazitúa, CAP's corporate finance manager, indicated that the company had US$301 million, and that in addition, Compañía Minera del Pacífico (CMP), its mining arm, recently secured US$330 million in a credit line, for a total of US$631 million. Gazitúa also reported on other mechanisms for financial strengthening: "There are infrastructure monetization initiatives, such as iron prepayment, which could provide us with close to an additional US$500 million in liquidity. This is enough capital to move forward calmly—always busy, but calm—during this negative period in the market. Because if everything that is being announced in the United States happens, at least the shipping issue should recover. Interest rates are here to stay high, unfortunately, and all industries are going to have to learn to live with that."
Assets on hold
CAP is prioritizing investment in its iron production business, where they aim to be "extremely competitive," said Gazitúa, emphasizing the message that the company aims to protect and improve liquidity. He stated that CAP has a series of assets and opportunities that the market in general is unaware of, such as the transmission line the group is selling and the need for a partner in Aguas CAP for a potential expansion project, which could provide better liquidity and reduce debt.
In the conference call, Gazitúa spoke about prepayment, the early payment of debt, noting that "they are quite competitive" and that the option of taking this route depends on current conditions, but he anticipated that in December they will go to market to assess the cost and interest. "This is a matter that could easily be between US$200 and US$300 million. It will depend on the cost amount, obviously," he pointed out.
Waiver negotiations
CAP Group's difficult financial situation could push it to breach the requirements agreed with the holders of its debt, which would require it to negotiate a waiver, or exemption, allowing those requirements to be postponed. Indeed, at the end of October, the rating agency S&P downgraded CAP from BB to BB- and placed it on negative watch, arguing that the iron cycle will pressure its debt and that it could cut the rating again if leverage does not fall below 4 times by 2027, or if it "fails to negotiate a waiver of financial covenants."
In any case, Gazitúa maintained that "I don't see us having any problem" obtaining a waiver from creditors in December, adding that "we have been talking with the banks for months, because it is also understood that this is a specific issue driven by market conditions, and we are adapting to market conditions."
Following the approval of the National Economic Prosecutor's Office (FNE) for the deal with AZA, CAP anticipates the division of roles and entities to meet the necessary conditions to close the agreement, which they estimate will be ready in the first quarter of 2027. The deal contemplates the merger of AZA with Compañía Siderúrgica de Huachipato, CSH, valued at US$130 million.
"We have a plan that we have not abandoned despite short-term difficulties. The skill of this management team is always to reconcile the short and long term, and to give the time it deserves to the urgencies of the crisis, but never abandon the plan we have shown you, which we want to reach with important milestones in 2030," Burr concluded.
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