Brazilian utility Centrais Eletricas do Para SA (CELP3) will seek to sell 650 million reais ($337 million) of bonds as part of a plan to recover from bankruptcy, said a person with direct knowledge of the matter.
The bonds would yield 15 percent a year and could be converted into stock in the future, said the person, who asked not to be identified because the plan isn’t public yet. A meeting with creditors to discuss the plan will be held within 120 days, Celpa said in an e-mailed statement on May 4, without providing details.
Celpa’s bankruptcy has led its parent Rede Energia SA (REDE4) to seek to renegotiate dollar-bond terms after the securities plunged and Fitch Ratings cut the company’s credit rating to one level above default. Fitch trimmed Rede Energia’s grade two levels to C from CCC on March 9, saying Celpa’s bankruptcy will likely prevent the parent from accessing the credit needed to roll over short-term debt.
Fitch cut Celpa’s credit grade to D from B- after it filed for bankruptcy on Feb. 28.
The Brazilian government is not planning to take control of Celpa to help investors, Energy Minister Edison Lobao said March 13. The government would only step in to help ensure power distribution if necessary, Lobao said. State-run Centrais Eletricas Brasileiras SA (ELET6), known as Eletrobras, won’t rescue the Rede Energia companies, Chief Financial Officer Armando Casado de Araujo said April 19.
About 66 percent of Celpa is owned by Rede Energia, while Eletrobras holds about 35 percent, according to data compiled by Bloomberg.
Rede Energia’s perpetual bonds have tumbled 34.6 cents since Feb. 27, the day before Celpa sought relief from creditors, to 48.9 cents on the dollar on May 4, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. Celpa’s dollar bonds due in 2016 have slumped 57.25 cents over the same period to 47 cents.
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