Chile’s Corp Group Banking files Chapter 11 bankruptcy in Delaware

By Sarah Lizee

Olympia, Wash., June 28 – Corp Group Banking SA and Inversiones CG Financial Chile Dos SpA filed Chapter 11 bankruptcy late Friday in the U.S. Bankruptcy Court for the District of Delaware.

The debtors are subsidiaries of Corp Group and own 26.2% of the common equity of Itau Corpbanca. They also own, directly and indirectly, 10.3% of the common equity of Itau Corpbanca Colombia SA.

According to a declaration filed Friday, the debtors’ revenue is almost exclusively dependent on dividends paid by Itau, and they own no property other than shares of Itau, about $13 million of unencumbered cash, and their interests in their respective subsidiaries.

The debtors have no operations or trade obligations, but have financial debt, including substantial secured obligations to Itau and other South American banks, and $500 million in face amount of 6¾% notes due 2023.

Over the past several years, the financial performance of Itau has deteriorated dramatically, the bank said. In turn, the share price of Itau Corpbanca has decreased and the debtors have received far smaller dividends than expected when Corp Group Banking issued the notes and incurred obligations to Itau.

Based on the current condition of the bank, the debtors are unable to repay their obligations in full.

Beginning in the third quarter of 2020, the debtors urged their two primary creditor constituencies, Itau and an informal group of noteholders, to engage in discussions aimed at achieving a consensual restructuring or orderly liquidation of Corp Group.

The debtors said that while Itau has participated in the discussions for several months, the informal group of noteholders has been unwilling to negotiate on the basis of Corp Group’s proposals.

In January, some noteholders in the informal group commenced proceedings in Santiago, Chile by filing a pre-judicial discovery motion requesting certain information from Corp Group Banking and some of its affiliates.

On June 15, the noteholder group filed a complaint in the Chilean action seeking to avoid numerous transactions made by Corp Group Banking over the past seven years, and on June 23, the group filed a request for an emergency injunction appointing an administrator over Corp Group Banking and freezing its assets, including assets that are pledged to Itau and other secured creditors.

The debtors said they believe that the claims asserted by the noteholder group are without merit.

“Unfortunately, the ad hoc group’s attempts to collect on their unsecured claims have forced the debtors to expedite the filing of these Chapter 11 cases to protect the value of the debtors’ estates and to ensure that all of their creditors are treated fairly, in accordance with their respective priority under applicable law,” the debtors said.

The bank listed $500 million to $1 billion in assets and $1 billion to $10 billion in liabilities.

Its largest unsecured creditor is Deutsche Bank Trust Co. Americas, based in New York, with a $543.03 million unsecured notes due 2023 claim.

The Santiago, Chile-based bank filed bankruptcy under Chapter 11 case number 21-10969.

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