by Aline Lima, Lucy Monteiro and Fabiola Gomes
Light's creditors have been considering working on an alternative plan, after disappointing repayment proposals presented by the Brazilian electricity company, three sources close to the matter said.
The distance between Light and its creditors has increased ever since debt restructuring talks passed to the command of businessman Nelson Tanure, Light's largest shareholder, according to the three sources.
Light presented its reorganization plan on 15 July, and on 18 July its shareholders approved the new board members proposed by WNT Gestora de Recursos, Tanure's fund. The board hired BR Partners as financial advisor, and Tanure has been personally involved in the restructuring, as reported.
The first proposal presented to creditors after the filing of the plan was worse than the terms of the plan submitted to the court, according to the first source and a fourth source close to the matter.
“Instead of using an X amount of the company's cash flow to service the debt, as in the plan filed, the amount [used as the basis] was reduced to two-thirds of X,” the fourth source said.
The company then made substantial changes to this first proposal and recently presented a more “reasonable” offer, the fourth source said.
Light is now proposing a debt exchange with no nominal haircut to be paid in five years, adjusted by the Brazilian IPCA inflation benchmark plus 2%, after a five-year grace period, according to a fifth source close to the matter.
In the plan filed with the court in July, Light offered a debt exchange with a 20% haircut for creditors who do not wish to take part in a capital increase, to be paid in 10 years after a five-year grace period, adjusted by the IPCA inflation benchmark.
Unsecured creditors also have the option to convert debt into equity, limited to BRL 3bn (USD 610.6m), or to be repaid in cash with a minimum 60% haircut.
With Light's new proposal, creditor recovery projections have improved, “but there may still be important asymmetries,” the fourth source said.
“The first proposal was absurdly ridiculous, the second is only ridiculous,” the first source said. “He [Tanure] wants to extract an absurd value from creditors, but this is not going to happen, we will work on an alternative plan.”
A spokesperson for Light declined to comment on the matter. Spokespeople for Tanure and BR Partners did not respond to a request for comment.
“The alternative plan is indeed a possibility to improve payment conditions,” the second source said, noting that such improvement could be achieved through debt instruments rather than equity.
“Light's creditors are extremely united, all of them: bondholders, holders of the debentures and banks,” the second source added.
In the meantime, certain creditors have been working on a counterproposal to present to the company, according to the third and a fifth source close. The counterproposal may be presented within 15 days, the third source said.
The idea is to comment on the company's proposal and make suggestions, the fifth source said. "If it comes to that point [of an alternative plan], we will present it, but it is not the time yet.”
“Creditors must have a reasonable minimum remuneration, much more than IPCA plus 2%, and a structure that encourages debt capitalization, which basically translates into fair conversion price and some type of governance,” the fifth source said. “The clock hand is moving, just not enough."
Light’s USD 600m 4.375% 2026 bonds traded at 44.475 today, according to MarketAxess.
