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COURT: Light reorganization plan proposes capitalization, reverse auction and debt exchange

Light has submitted its debt restructuring plan, which offers unsecured creditors the repurchase of unsecured debt through a reverse auction, participation in a capital increase and the exchange of old debt for new, according to the plan.

The Brazilian power company has proposed to raise at least BRL 1bn (USD 205m) in new money, via a capital contribution or new credit lines. The debtor’s largest shareholder, Nelson Tanure, the owner of the WNT investment fund that holds a 21.08% stake in the company, had already signaled his intent to participate in a capital contribution, as reported.

Light is offering unsecured creditors the repurchase of debt via a reverse auction, in which the company would allocate up to BRL 3bn, with a minimum 60% haircut. The payment will occur within 30 days after the result of the auction, on a date to be announced later.

Creditors can also choose to have their credits repaid, by either participating in a capital increase or exchanging their new debt.

Those choosing to be repaid through the reverse auction will have any credits remaining after the auction repaid in equity or new bonds.

Unsecured creditors may participate in the reverse auction if they are not party to any claim against the debtor, Light SESA, Light Energia and its affiliates, its shareholders or managers. Also, these creditors must have withdrawn or refrained from taking any measure of execution or filing any claim against the company, according to the plan of reorganization.

Unsecured creditors participating in the capital increase will convert part of their debt to equity, limited to BRL 3bn.

Creditors who do not wish to take part in the capital increase may exchange their debt for new debt. In this case, they will suffer an additional 20% haircut. The new debt will amount up to BRL 3.5bn, to be paid in 10 years after a five-year grace period, adjusted by the IPCA inflation benchmark.

However, unsecured creditors of Light SESA who agree to not litigate will have the option to be repaid with new debt, maturing in 10 years, after a five-year grace period, adjusted by 2% plus the NTN-B inflation benchmark. This option is limited to BRL 1.25bn.

Unsecured creditors of Light Energia who also have agreed not to litigate will also have the option to be repaid with new debt.

USD-denominated creditors will receive a bullet bond due 2026, paying 4.375% per year. The maturity, however, may be extended for two years, paying an additional 1.2 percentage points, according to the plan.

BRL-denominated claimholders will also receive a bullet bond, maturing in 2025, adjusted by inflation benchmark IPCA plus 4.85% annually. These notes may also have their maturity extended to 2028, with a 1.2 percentage-point increase in the interest rate.

Light may carry out an eventual corporate reorganization in order to adapt its structure to implement the proposals foreseen in the recovery plan or in its strategic business plan, in addition to the organization of isolated production units (UPIs) for sale, according to the plan. Such a corporate reorganization may even admit new shareholders, provided that such operations do not impact compliance with the plan.

Light requested bankruptcy protection, limited to Light SA, in a maneuver to circumvent rules forbidding concessionaires from requesting bankruptcy, on 12 May. It requested the extension of the effects of the stay period protection to Light SESA and Light Energia (both operators of concessions in the state of Rio de Janeiro), which was granted on 15 May.