* La Polar shares rebound after plunge; trade suspended
* Company fires more officials before shareholder meeting
* Shareholders approve around $200 mln capital increase (Adds analyst’s comment, unsubscribed shares to be auctioned)
By Brad Haynes and Felipe Iturrieta
SANTIAGO, June 22 (Reuters) - Chilean retailer La Polar LAP.SN said it expected to survive a credit scandal that had raised the specter of bankruptcy after its shareholders approved a $200 million capital increase on Wednesday.
New President Cesar Barros, who took the helm this week to navigate a scandal that sent shockwaves through the local economy and slashed three quarters of the company’s value in a matter of weeks, said there had been fraud but it was limited.
La Polar has admitted renegotiating credit without the consent of customers, which critics have said was aimed at hiding bad loans to keep loss provisions down. The scandal surprised regulators and the government has said it will launch a criminal investigation into the matter.
La Polar’s shares, rebounding after a massive slide, surged around 16 percent on Wednesday before the market regulator halted trading pending the outcome of the meeting.
“With around $200 million approved and subject to negotiations with bondholders and banks, we think the company is viable according to our preliminary estimates,” Barros told a news conference after the shareholder meeting.
The new share issue, smaller than the $400 million many expected, will go toward working capital, Barros said, adding that he had not ruled out a further capital increase. Any shares that are not subscribed in the planned capital raising will be auctioned on the stock exchange, the company said.
“The company should be able to handle its short-term obligations now,” said Veronica Perez, an analyst with the BCI brokerage in Santiago. “It still seems likely a controlling interest will enter the company.”
Barros previously headed trade group SalmonChile, where he renegotiated with lenders during a credit crunch that hit the salmon sector in the wake of the global financial crisis. He has vowed to get to the bottom of the La Polar scandal.
“There has been fraud, but it is limited to an issue and amount we think is perfectly manageable,” he said, without elaborating.
Barros said the company could survive without a controlling shareholder, amid expectations an investor could try to take over the company. It has retail stores in Chile and Colombia that sell goods ranging from clothes to plasma TVs. He said the company would likely slow its planned expansion in Colombia.
Angry minority shareholders shouted “thieves!” outside the shareholder meeting in Santiago and demanded that the government safeguard their investments.
“This is fraud and is theft,” shouted Luis Pareto, a minority shareholder, saying he had been blocked from entering the meeting.
La Polar’s shares surged on Wednesday after falling more than 80 percent since June 9, when the company disclosed that it had fired some managers over customer credit practices.
The company said late on Tuesday that it had fired 11 senior officials as it tries to defuse the scandal, which has sent shockwaves through the local bourse. It said it had dismissed “most of them for gravely failing to fulfill the obligations of their contracts.”
The company had already fired a clutch of top officials and the entire board of directors has tendered its resignation. Barros said further significant management changes would follow.
The company has estimated that it would need an additional $890 million, twice the original estimates, to cover potential losses from irregularities with customer credit.
Finance Minister Felipe Larrain said on Sunday the government would not intervene if La Polar went into bankruptcy. [ID:nN1E75J001] (Additional reporting by Antonio de la Jara, Maria Jose Latorre and Alexis Krell; writing by Simon Gardner)