Suzano Papel & Celulose SA, a Brazilian pulp producer, may renegotiate bond covenants or pay down 635 million reais ($351 million) of the securities after a weaker local currency boosted the value of its dollar debt.
“If the real devaluates further, we will do one of the two alternatives,” Chief Executive Officer Antonio Maciel Neto told reporters today in Sao Paulo. “We have enough cash and this is the most expensive debt that we have.”
Salvador, Brazil-based Suzano’s bond covenants mandate that its debt remain below 4 times earnings before interest, taxes, depreciation and amortization. Debt surpassed that level in the third quarter after the local currency’s plunge increased the value of its dollar obligations, and it risks breaching the covenant if it tops the limit for a second time. Brazil’s real dropped 17 percent last quarter, the worst performance of the world’s 16 most-traded currencies.
The company also plans to sell assets in a bid to reduce net debt to as low as 3.5 times Ebitda, Maciel Neto said. Suzano had net debt of 5.3 billion reais at the end of the third quarter, according to its financial statements.
Suzano rose 2 centavos, or 0.3 percent, to 7.16 reais at 4:51 p.m. in Sao Paulo trading. Earlier, it declined as much as 2.5 percent.
Yields on Suzano’s dollar bonds due in 2021 rose for the first time in eight days, climbing seven basis points, or 0.07 percentage point, to 7.20 percent.