Brazil’s Suzano Says Bonds May Be Redeemed, Rules Changed

Suzano Papel & Celulose SA (SUZB5), Brazil’s second-largest pulp maker, may buy back 500 million reais ($244 million) in local bonds or seek a third waiver on covenants after debt jumped to a 10-year high, Chief Financial Officer Alberto Monteiro said. Shares dropped.

“Today I’d prefer to buy back the local bonds, but it really depends on a negotiation with the holders,” he told reporters today in Sao Paulo. “We may have difficulties to meet the covenants.”

Rules stipulate that the notes may be redeemed if net debt surpasses four times earnings before interest, taxes, depreciation and amortization at the end of this quarter and the next, Monteiro said. Net debt was 5.7 times Ebitda in the second quarter, the company said today.

Net debt jumped to a 10-year high of 6.85 billion reais in the second-quarter, up 63 percent from a year ago, as the Salvador, Brazil-based company is stepping up investments to more than double output of pulp.

Suzano has renegotiated covenants on the local bonds twice since 2010, paying a penalty fee on both occasions, according to a presentation on its website.

Suzano dropped 3.3 percent to 3.87 reais at 2:46 p.m. in Sao Paulo and slid as much as 3.5 percent, the steepest intraday decline since July 2. The Bovespa index declined 1.4 percent.

To contact the reporter on this story: Lucia Kassai in Sao Paulo at lkassai@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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