Rede Energia Restructures Local Debt After Celpa Defaults

Rede Energia SA’s creditors holding local bonds due in 2014 approved a restructuring that allows the Brazilian power company to repay the securities with shares from its units and extend the maturity by 18 months.

The notes will be repaid by June 2016 after six principal payments are made beginning in December 2013, according to the minutes of a June 5 bondholder meeting released today. The restructuring gives the company the option to make some of those payments with equity. The minutes didn’t state the amount of bonds outstanding.

Rede Energia, a holding company that controls power distributors, is seeking to ease its debt burden after one of its units, Centrais Eletricas do Para SA, filed for bankruptcy and defaulted on dollar bonds in February. Fitch Ratings cut Rede Energia’s credit rating to C, or one level above default, in March. The company’s dollar bonds traded at 37.38 cents on the dollar at close in New York, down 1.8 percent from June 8, according to data compiled by Bloomberg.

“Bondholders are going to take some control of Rede -- I like that,” said Luiz Campos, who manages about $800 million of emerging market debt at Dinosaur Securities, said in a phone interview from Sao Paulo. “It’s a better beginning than Celpa’s proposals” to restructure its debt, he said.

Celpa Restructuring

Campos said the kind of debt restructuring Rede Energia is planning with its local debt probably wouldn’t work for foreign debt holders because the company doesn’t have American Depositary Receipts. Los Angeles-based Houlihan Lokey is serving as financial adviser to holders of Rede Energia’s dollar-denominated perpetual bonds amid restructuring discussions.

Celpa, based in Belem, Brazil, said May 7 that it will seek to raise 850 million reais ($441 million) through a bond sale and loans as part of a plan to recover from bankruptcy. The plan includes selling 650 million reais of local bonds convertible into shares to yield 15 percent and loans of 200 million reais, Celpa said in a regulatory filing.

Rede Energia said in an e-mailed response to questions that it had 383 million reais of local bonds outstanding as of March 31, without providing a breakdown by maturity.

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