Unigel and holders of its USD 530m 8.75% 2026 have engaged in initial debt renegotiation talks, according to three sources close to the matter.
The coupon payment due 1 October is an issue the Brazilian chemical company is trying to address, the first source said. It is not clear yet if there will be a waiver from bondholders or if Unigel will pay a portion of the coupon and postpone the remainder, the same source added.
“Conversations with bondholders have started, but are still very incipient,” the second source said, noting that there is no decision on the coupon payment at this point.
Unigel is seeking to re-profile its debt, the third source close said, adding that the idea is to avoid taking the matter to court.
Creditors of the chemical company were reported to be searching for potential buyers for either the company itself or its industrial assets.
However, domestic and international bondholders are not discussing such a possibility, the first and the second sources said. “For the time being, the idea is to negotiate with the company, provided that the proposals are obviously reasonable,” the second source said.
Unigel and domestic bondholders holding 10% of the BRL 500m (USD 100m) in debentures have scheduled an online general meeting on 5 September to discuss a waiver of a covenant limiting leverage to 3.5x, a threshold probably breached in 2Q23.
The domestic holders and the company will discuss conditions to keep the debt renegotiation talks, including new terms for the first domestic bond issuance, according to a call notice published on 15 August.
Debenture holders will also vote on the possibility of market participants, and eventually its creditors, offering “new money," so that Unigel can complete industrial plants that are under construction, according to the notice.
“The company needs new money, although it is not clear yet how much is needed,” the first source said. It is important to know, for instance, if Unigel will have access to loans from the BNDES government development bank to conclude the investments in its plants, the same source added.
The borrower intends to present a business plan that will guide debt restructuring talks with creditors.
“Unigel is a good company in a difficult moment. It has good potential, and it should attract interest from investors and other groups interested in the sector,” the third source said, citing projects such as the green hydrogen plant under construction in Brazil and the fertilizer division.
Unigel and Petrobras signed a non-disclosure agreement (NDA) to discuss a possible joint venture involving the development of opportunities in the fields of fertilizers, green hydrogen and low-carbon projects, as reported.
The company delayed the release of its 2Q23 financial results, originally scheduled for 14 August, because of the ongoing process to enhance its capital structure. The new date has not been disclosed yet.
Unigel hired Moelis & Company as financial advisor and it is advised by Felsberg Advogados and Simpson Thacher & Bartlett. An ad hoc group of Unigel bondholders hired Houlihan Lokey as a financial advisor, Munhoz Advogados and Cleary Gottlieb as legal advisors.
The group of domestic bondholders will vote on the approval of Valuation Consultoria Empresarial as financial advisor, and Lefosse Advogados as legal advisor, at the 5 September general meeting.
A spokesperson for Unigel declined to comment.
Unigel’s USD 530m 8.75% 2026 bonds traded at 39.78 on 18 August, according to MarketAxess.