Sunday 24 September 2023

“Buyer, beware”, main lesson in the Aldesa case

The company says it has real estate projects that it will need to time convert to cash to pay out its investors, in full

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23 September 2023 - At The Banks - Source: BCCR

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The “aintervención judicial”, a process in Costa Rica akin to Chapter 11 in the United States, in the case of Aldesa provides a lesson for investors to beware before risking any significant investment to avoid loss of capital and/or interest payments.

“The plan of the three years is to advance the real estate projects to be converted to cash, and with that to pay out the investors, said Javier Chaves, president of Aldesa Corporación de Inversiones.

Last week, the Aldesa Corporación de Inversiones said it would close its close its Stock Exchange, suspend the payment for three years the payment of real estate projects that are not its Investment Funds, after requesting a judicial intervention.

Javier Chaves, president of the financial company, told La Republica, “We are honest people and we are going to pay the investors”.

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Aldesa’s financial problem from two problems, one particular to the company, where financial problems began to appear about a year and a half ago, when the company did not receive payment from the sale of the Malaga City project in Alajuelita, causing a cash shortage in the order of US$26 million dollars.

The other, the Costa Rica economy in general.

Chaves explained that the cash shortfall accumulated over time but it didn’t knock it down, but it did make the company vulnerable to withstand the economic downturn.

“We began to have a decrease in income that we normally had from investros, and that causes us to start falling behind on some payments. The first thing I did was talk to the creditors, and second was to activate a liquidity plan, with a credit with a private bank, which was postponing the disbursement. Another source of liquidity was the sale of a Coyol de Alajuela zona france (free trade zone) until finally it became insufficient for the needs of the day,” said Chaves.

The businessman said by mid-February, the situation was not sustainable, that is when the company suspended payments and began to explain to investors there was going to be a plan that would be presented to the courts.

At risk are some 500 investors with a total of US$200 million dollars at risk in eight private real estate projects who will have to wait up to three years, the time the company needs to convert the hard asset to cash and the time investors will receive full payment.

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“People are not going to lose their investments in Aldesa because the projects will provide enough cash to pay,” assures Chaves.

For many, an investment in Aldesa was a sure bet. After all the company has been in business for the last 50 years, started by Chaves’ father.

However, the businessman stresses, people were told of the risk of investing in a private deal, that the Aldesa products were being offered privately.

“Many of those now claim that at the time they did so because they wanted to earn more money. And some, not all, now claim they did not know,” said Chaves.

Not supervised

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Being a private offering the Aldesa Corporación de Inversiones investments did not come under the regulation of the Superintendencia de Valores  (Superintendency of Securities).

María Lucía Fernández, superintendent general of Valores, explained: “Aldesa was never under the supervision of Sugeval, therefore, it does not have the power to intervene in its business”.

Fernández added the need for investors to be aware of the need to participate in projects that are regulated to guarantee the security of their investment.

The hammer on all Aldesa payments to investors came on Friday, March 8, 2019.

What has been your experience with investing in Costa Rica? Did you invested in Aldesa? What’s your opinion? Post your reponses or comments below or to our official Facebook page.

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