Reuters: Bankruptcy News: UPDATE 1-Brazil's Rede to start debt restructuring talks

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UPDATE 1-Brazil's Rede to start debt restructuring talks Apr 2nd 2012, 23:29 Mon Apr 2, 2012 7:29pm EDT * Cash-strapped firm likely to seek debt restructuring * Makes coupon payment on 11.125 pct perpetual notes * Seeks "out of court" restructuring, vows "good faith" By Guillermo Parra-Bernal SAO PAULO, April 2 (Reuters) - Rede Energia, the cash-strapped Brazilian power distribution company, will reach out to creditors to seek an out of court debt restructuring as it pledged to keep servicing its onerous foreign liabilities. The company will contact holders of its U.S. dollar-denominated perpetual notes as "part of a potential debt restructuring program," according to a securities filing signed on Monday by Maurício Halewicz, the company's investors relations director. Rede Energia, based in São Paulo, made its scheduled interest payment on the 11.125 percent perpetual notes earlier in the day. The company has enough funds to make the next two payments, the filing said. The decision to contact holders comes after efforts by Chairman and largest shareholder Jorge Queiroz Jr to sell part or all of its 54 percent stake in the company have suffered serious setbacks. 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. Celpa, a unit of Grupo Rede serving the northern state of Pará, filed for bankruptcy protection on Feb. 28, citing "a worsening financial and economic situation." Rede Energia will request bondholders to organize on a "steering committee" - a group that represents its collective interests - to start talks. "The company looks forward to commencing good faith negotiations with the steering committee for the perpetual notes as soon as possible and reaching an agreement that is mutually beneficial for all parties," according to a separate regulatory filing. The move could help Rede Energia prevent cross-default clauses from hampering the group ahead of a Celpa default. Lack of support from bond and shareholders could drag on Rede's finances, analysts said. The yield on the notes fell slightly to 21.38 percent on Monday from 21.40 percent at the end of last week. Yields, which move inversely to prices, usually fall when the risk perception about the issuer or the securities improves. Rede Energia's assets have been considered a takeover target as the government and private companies boost their market share in power distribution, a segment in which bigger scale offsets the risk of lower power rates in coming years. Consolidation is key for the companies, known as DisCos, to gain financial and operating muscle. Rede Energia hired Rothschild & Co as its financial adviser on the talks. Calls to Rothschild's office in São Paulo seeking comment were not immediately answered. The interest payment on Monday was made through a partial draw under a letter of credit, the filing said. Link this Share this Digg this Email Reprints

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