Debtwire Latin America Court Spotlight May 2023

Legal Analysis 2 June

Debtwire Latin America Court Spotlight May 2023

by Arthur Almeida, with RDB charts by Jayjeet Sharma

Last month, Brazilian electricity distributor Light SA requested bankruptcy protection on behalf of the holding company of the group, along with an injunction to extend the automatic stay protection to affiliates Light Servicos de Eletricidade (SESA) and Light Energia, which are prevented by the law from filing for bankruptcy as they hold energy concession agreements with the government. The ruling admitting the case for review and extending the stay to the Light affiliates was challenged by several creditors, who argued that it would set a dangerous precedent for the country’s insolvency system. Other Latin American companies also initiated restructurings last month, including OEC and Intercement and Atento, which retained legal and financial advisors and started debt restructuring conversations that could result in a bankruptcy filing.

Source: Debtwire’s Restructuring Database

Also in May, Samarco Mineracao and its shareholders and bondholders reached an agreement over the terms of a consensual debt restructuring proposal for the mining company, following two years of disputes that involved a shareholder-funded debtor-in-possession (DIP) financing facility, stay period extensions and creditor-proposed plans, among other issues. Additionally, telecom services provider Oi SA presented its reorganization plan, centered on asset sales, DIP financing and a potential capital increase, while MatlinPatterson secured US bankruptcy court confirmation of its Chapter 11 plan, after resolving an objection from HJDK Aerospacial.

In other cross-border news, a US bankruptcy court granted Chapter 15 recognition of Ocyan’s (formerly Odebrecht Oil and Gas) prepackaged plan, which was sanctioned in March by the Brazilian court assigned to rule on the extrajudicial recovery process. Brazilian cement maker Cimento Tupi withdrew a request in its Chapter 15 case to recognize and enforce its debt restructuring plan in the US, after a Rio de Janeiro court of appeal nullified the original repayment proposal and ordered the company to present a new plan.

Source: Debtwire’s Restructuring Database

Also last month, the court overseeing Queiroz Galvao Energia affiliate Companhia Energetica Santa Clara’s judicial recovery process ordered the closing of the case, reasoning that the company was able to complete the debt restructuring proposal approved by creditors and sanctioned by the court. Chile-based Latam Airlines asked the US court handling its Chapter 11 process to close its case as well last month, arguing that the reorganization plan approved by creditors and sanctioned by the court was substantially consummated.

Source: Debtwire’s Restructuring Database

May 2023 was also marked by some significant appellate-related news. The Public Prosecutor’s Office of the State of Rio de Janeiro and certain financial creditors of retailer Americanas SA appealed the decision that set the fees of the judicial managers tasked with assisting the court throughout the case. In addition, Cimento Tupi creditors appealed the ruling that denied their statute of limitations argument against a credit held by Switzerland-based company Tupacta.

In Light SA, the appeal filed by Citibank against the precautionary measure granted in favor of the company in advance of the bankruptcy filing was rejected, and the appeals on the bankruptcy admission ruling filed by domestic bond trustees Simplific Pavarini DTVM and Vortx DTVM were suspended while a ruling on certain motions to clarify the appealed decision are pending with the lower court.

Additionally, Oi SA creditor Banco do Brasil appealed the rulings that (i) admitted the bankruptcy protection request for review, and (ii) approved a USD 275m DIP facility. A Sao Paulo appellate court ruled in favor of Abengoa Bioenergia creditors Banco Santander, Banco Bradesco and BAF Latam Trade Finance Group last month in the appeals they filed against the decision that allowed certain other unsecured creditors to be reclassified into a subclass that would provide them with higher priority recoveries. In Mexico, the First Federal Bankruptcy Court in Mexico City admitted the appeals filed against the rulings that recognized the creditors of both (i) Unifin Financiera and (ii) certain AlphaCredit subsidiaries.

Source: Debtwire’s Restructuring Database

Other court developments of interest last month involving Latin American distressed companies include the appointment of the Interjet sindico assistant, TV Azteca being prohibited from releasing any information regarding its financial situation, and Credito Real signing a restructuring support agreement with certain of its unsecured creditors. Finally, a Delaware bankruptcy court approved a USD 575m agreement to settle the Maxus Liquidating Trust’s claim against YPF and Repsol.

The months ahead

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