Central bank chooses to receive Banco de Chile debt payment in cash

Tuesday, March 22, 2011

Chile's central bank announced that it has opted to receive its share of Banco de Chile's (NYSE: BCH) 2010 profits in cash, the monetary authority said in a press release.

Banco de Chile is required to make annual payments until 2036 to regain a stake held as collateral by the central bank. This obligation goes back to a central bank-led bailout during the country's financial crisis at the beginning of the 1980s.

On March 17, Banco de Chile's shareholders approved distributing 70% of last year's profits, as well as capitalizing the remaining 30% by issuing paid-up no-par value shares among shareholders.

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After weighing the pros and cons of the 70:30 deal, the central bank decided to go for the cash. Banco de Chile must now transfer to the central bank 122bn pesos (US$255mn), or 35.3% of last year's earnings, the press release reads.

Banco de Chile's good results in 2010 allowed the bank not only to pay 3.2mn of the country's UF inflation-linked units (or 69bn pesos) of its annual debt with the central bank, but also to allocate an additional 2.5mn UFs to the account.