Telefonica's Peru unit to enter bankruptcy proceedings

Updates throughout with details from Peru statement, comment from parent company and antitrust watchdog, context from reported Latin American asset sales, company background

By Marco Aquino and Ana Cantero

LIMA, Feb 14 (Reuters) - Spanish telecommunications giant Telefonica's TEF.MC Peru unit will file for bankruptcy protection in the country, it said on Friday, amid a string of asset sales around Latin America in recent years as the firm looks to cut debt and invest in 5G.

The firm added that it has hired Kroll Advisory to assist in the proceedings and will tap a member of the team to act as Chief Restructuring Officer.

"The initiation of the restructuring process does not imply liquidation, let alone bankruptcy," the company said in a statement.

"Rather, it will allow the company to work with its creditors and other stakeholders to continue to serve Peru, protect its employees, strengthen its financial position and ensure the sustainability of its business."

Separately, Telefonica said in a filing to the Spanish stock market regulator that its Hispanoamerica unit had granted a credit facility worth around 1.55 billion soles ($419 million) to the Peru unit to meet its operational cash requirements.

"The financial situation of Telefonica del Peru has been very negatively affected by tax contingencies that are more than 20 years old, as well as by administrative decisions which have placed the company in a competitive disadvantage within a particularly challenging market environment," it said.

"Telefonica reiterates that Telefonica del Peru's liabilities are not guaranteed by any other company of the Telefonica Group," it added, saying it would continue to "explore strategic alternatives" regarding its Peru investment.

Peru's competition watchdog, meanwhile, said it had 90 working days to respond to the filing.

The announcements came the same day Spanish newspaper Cinco Dias reported, citing unidentified financial sources, that Telefonica TEF.MC had hired investment bank JPMorgan JPM.N to sell its Mexican business .

The newspaper said Telefonica was planning to sell the unit before its annual shareholders' meeting, typically held in April or May.

Local media have also reported that Telefonica has put its Argentine business up for sale and the company has said it is seeking to sell a majority stake in its Colombian unit to New York-listed Millicom TIGO.O.

Telefonica unexpectedly replaced CEO Jose Maria Alvarez-Pallete last month.

Elena Maestre, the CEO of Telefonica's Peru unit, said in a statement the firm had decided to enter the proceedings after evaluating various alternatives.

"We are focused, together with employees and suppliers, on guaranteeing Telefonica del Peru's long-term permanence in order to bring the best technology to our customers, while meeting our regulatory commitments," she said.

($1 = 3.6990 soles)