Debtwire has published a profile of the Paulmann family, which controls Chilean retailer Cencosud SA. Last month, Cencosud issued USD 1bn 4.375% notes due 2027 and completed a tender offer for its USD 750m 4.4% 2021 notes and USD 1.2bn 4.875% 2023 notes, repaying USD 493m of the former and USD 257m of the latter.
The report is the latest in a series on Latin American business families and includes research on public and private shareholdings, family members, affiliations and risks. Other families profiled by Debtwire include Odebrecht, Batista (JBS), Steinbruch (CSN), Salinas (TV Azteca, Grupo Elektra), Elsztain (IRSA) and Eurnekian (Aeropuertos Argentina 2000, Compania General de Combustibles).
German-born Horst Paulmann and his family control Cencosud, Chile’s largest retail company. The children of his late brother Jürgen own a separate business group that includes Sky Airline. Santiago-listed Cencosud operates over 1,100 outlets including supermarkets, department stores and home-improvement stores in Chile, Argentina, Brazil, Peru and Colombia. It also operates 54 shopping centers.
In July 2016, the Paulmann family raised USD 445m through the sale of a 6% stake in Cencosud. It used the proceeds to pay down USD 1.3bn of debt that the family’s holding companies incurred in 2013 in connection with Cencosud’s acquisition of Carrefour’s Colombian operations.
Shareholder-related risk analysis:
Succession Risk – Moderate
A succession plan is in place and the family’s second generation has extensive management experience. However, succession would bring significant uncertainty as Horst Paulmann, who is in his 80s, has led Cencosud since its founding.
Political Risk – Low
Cencosud’s business is not heavily reliant on political patronage but is sensitive to regulation that can be influenced by politics. Horst Paulmann has generally had closer ties to more conservative, pro-business administrations.
Legal and Regulatory Risk – Moderate
Cencosud’s expansion has faced resistance from anti-trust regulators. The company has had occasionally contentious relations with unions. A price-fixing scandal in Chile has targeted Cencosud as well as its two main rivals, SMU and Wal-Mart. Difficulties obtaining regulatory approvals under the current center-left government have caused costly delays in opening Costanera Center’s office tower.
Transparency Risk – Moderate
There is limited disclosure on the finances of holding companies through which the family controls Cencosud. Difficulties repaying holding-company debt, which was restructured last year, may affect the family’s control of Cencosud and its management decisions. The family’s liquidity needs likely contributed to recent asset sales and extraordinary dividend payments by Cencosud.
Governance Risk – Low
Cencosud has not faced significant controversy related to corporate governance.
Expansion Risk – Moderate
Large investments in the past decade, including the construction of Costanera Center and the acquisition of Carrefour Colombia, have brought added risk in less familiar sectors and geographies.
Credit History Risk – Low
Cencosud’s bonds are investment grade, and the company does not have a history of default or bankruptcy.