Reuters: Bankruptcy News: Brazil's Celpa seeks debt haircut, more funds

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Brazil's Celpa seeks debt haircut, more funds May 7th 2012, 15:40 Mon May 7, 2012 11:40am EDT * Rede's Celpa proposes 40 pct debt haircut on plan * Celpa filed for bankruptcy protection in February * Comes as Laep-led group considers bid for company By Anna Flávia Rochas and Guillermo Parra-Bernal SAO PAULO, May 7 (Reuters) - Brazil's debt-laden power distributor, Celpa, proposed a 40 percent reduction in the value of its liabilities as part of a debt renegotiation proposal seeking to stave off bankruptcy, according to a court document released on Monday. Celpa, controlled by electricity holding company Rede Energia, plans to raise 650 million reais ($337 million) through the sale of local debt notes that can be converted into shares after a certain period, the document said. The plan also includes Celpa's obtaining 200 million reais in fresh credit lines through the end of 2013. Celpa, which serves the northern state of Pará, filed for bankruptcy protection in February, citing "a worsening financial and economic situation." The company had until Monday to present a debt restructuring plan to a Pará court, and analysts largely expected it could force creditors to accept losses and give Celpa more time to pay its debt. "It's the first half of the game here, and there is still a lot of uncertainty," said Alfredo Viegas, head of emerging market research at Greenwich, Connecticut-based broker-dealer Knight Capital. "Currently, bonds are trading in line with expected losses, but many things could happen down the road." Prices for Celpa's 10.5 percent bond due in June 2016 have shed about half of their value since the start of the year to about 50 cents on the dollar on Monday. The yield, which trades inversely to bond prices to denote a deteriorating risk perception of the issuer, rose to about 36 percent earlier in the day. The restructuring plan seeks to help Rede Energia prevent cross-default clauses from hampering the group in the event of a Celpa debt moratorium. Still, lack of support from bond- and shareholders could drag on Rede Energia's finances, analysts said. Last week, Reuters reported that a group of Brazilian and foreign investors led by buyout firm Laep Investments could bid for Celpa independently of the acceptance of the latter's debt plan by creditors. Laep Chief Executive Luiz Cezar Fernandes said the group would be in a position to offer more for Celpa assets than other potential bidders, facilitating an accord between creditors and Jorge Queiroz Jr, Rede Energia's controlling shareholder. In April, Rede pledged to reach out to creditors to seek an out-of-court restructuring. The lack of firm bids is preventing Queiroz, also Rede Energia's chairman, from selling part or all of his 54 percent stake. In recent weeks, the government decided against bailing out Celpa, sparking a tumble in its bonds. Queiroz's stake in Rede, whose debt almost tripled to $3.4 billion over the past five years, is valued at $600 million by some analysts. Link this Share this Digg this Email Reprints

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