Financial Diary – Santiago
A new company in the construction sector began a judicial reorganization process. Now it was the turn of Constructora Armas – a company linked to Grupo Armas -, which requested the opening of a judicial procedure for financial reorganization in the 10th Civil Court of Santiagoin order to organize its financial commitments and enable its future development without affecting long-term relationships with its collaborators, suppliers, contractors and clients.
At the moment, Constructora Armas presents liabilities of more than US$21 million, of which US$9.4 million correspond to entities not related to the group, such as BancoEstado, Banco de Chile and Scotiabank. In addition, the firm has debts with nearly 400 suppliers and subcontractors.
“This request is a measure that we voluntarily adopted for the group’s construction company, with the purpose of preserving the viability of its operationnormalize its financial situation and have deadlines that allow us to ensure the necessary cash flows to fulfill the commitments with our creditors, which we assume with the responsibility that characterizes the trajectory and reputation of the group,” said the Armas Administration and Finance manager. , Juan Cristóbal Fuentes.
Prior to the start of the judicial procedure – led by lawyer Juan Esteban Puga, partner of the Puga Ortiz law firm – the company undertook a major internal restructuring, reducing its expenses considerably and aiming to finish the current projects in execution as soon as possible.
To the date, Constructora Armas has three projects underway with approximately 700 apartments in total, of which only one has a level of progress less than 80%; and recently the company delivered other projects with nearly 2,000 units received.
Notably The judicial reorganization does not involve the group’s real estate area.
The reasons
The company – which to date employs 255 workers – explained that The main trigger for their financial problems was the 2020 pandemic.
As the firm explained, the health restrictions impacted the market, which generated a significant increase in material and import costsinterruptions in the global supply chain, transportation restrictions and increased demand for certain products.
“These problems caused shortages and, as a result, the prices of essential materials such as steel, cement and wood rose exponentially. On the other hand, Quarantines and travel restriction measures caused freezes, delays and lower productivity, to which was later added the increase in the cost of labor.”, stressed the firm.
The company indicated that the pandemic led central banks to raise interest rates to combat inflationwhich – added to other requirements of financial institutions – made loans for the purchase of homes more expensive, discouraging potential buyers and decreasing demand in the real estate market, which generated an accumulation of finished units for immediate delivery, and to be finished unsold.
“All of these factors have created an extremely challenging environment for Constructora Armas.affecting its financial stability and its ability to respond with its commitments to carry out construction projects profitably,” the company concluded.
