Junk bond mess in Chile getting messier

Santiago

WHEN Chilean junk-grade companies approached investors earlier this decade to sell bonds, the appeal was simple to understand: access to Latin America's most stable economy and some generous yields. While they got the yields, they also got the junk.

Over the past two years, sub-investment-grade corporate securities from Chile have posted the worst returns in the region after Venezuela's. The plunging bonds included US$1 billion of debt sold by retailer SMU SA and Automotores Gildemeister SA, Chile's exclusive dealer of Hyundai Motor Co vehicles. On Monday, Gildemeister proposed a debt restructuring that could saddle investors with losses as high as 50 per cent.