Light and its domestic and international bondholders are close to reaching an agreement regarding the share price to be used to convert debt into equity under its restructuring proposal, which had been one of the main obstacles in the negotiations, according to two sources close to the matter.

In addition, the Brazilian power company and its creditors are expected to agree to a “middle ground” between the interest rates proposed by each party for the portion of the debt to be repaid in new bonds, the first and a third source close said.

However, a new possible impasse has emerged regarding the treatment of accrued and unpaid debt interest, the first and second sources said.

In a meeting held on 18 March, Light backtracked on its proposal previously made to pay interest accrued on the notes incurred since the filing for bankruptcy protection, the first source said. Light claimed that these terms would be a deal-breaker, the same source noted.

“Creditors agree with a concession over the price to convert debt into equity, but the share price is [only] part of a package,” the second source close said. “The deal [as a whole] needs to make sense.”

In its plan, Light has proposed to repay 40% of the debt of the Light SESA distribution subsidiary with a convertible bond, and the other 60% of the debt would be repaid through a new five-year bond, including a three-year grace period, paying the IPCA inflation rate plus 4%.

The Brazilian energy provider is aiming to convert between BRL 2.5bn and BRL 3.5bn, and creditors participating in a capital injection would receive one Light SA share plus warrants for two additional shares, as reported.

The new version of its debt restructuring plan filed on 24 February was considered by creditors to be “worse” than the previous proposal. If the company and its creditors fail to reach an agreement, domestic bondholders plan to reject the company’s restructuring plan and make an alternative offer with the support of international bondholders.

“The creditors’ alternative plan is well advanced, with an investor willing to put up money and already in the final phase of evaluating the proposal,” the first source said.

At the same time, “there has been significant progress on the issue of the debt conversion price,” the first source said, without elaborating. The debtor offered a conversion price of BRL 6.00 (USD 1.20) per share, while bondholders proposed a value of around BRL 2.50 per share.

The parties are also close to reaching an agreement on the interest rate to repay the 60% portion of the debt, according to the second and third sources. The new interest rate would be halfway between the 7.5% per year requested by bondholders in USD (and the equivalent in BRL) and the 4% proposed by the company, the first and third sources said.

Creditors are now waiting for a “decent proposal” with regards to the accrued and unpaid interest rate, not only for creditors willing to convert debt into equity but also for the others who are not considering such an option, the first source said.

Ideally, as many creditors as possible should be brought in to convert the debt, but some creditors do not want or are not able to convert due to their own rules, the first source noted.

Light appears to be offering to pay accrued and unpaid interest debt to bank lenders, but not to bondholders and debenture holders, according to the second source.

A spokesperson at Light declined to comment on the matter.

Light requested bankruptcy protection with BRL 11bn (USD 2.2bn) in debt subject to the restructuring. The creditors’ meeting is scheduled for 25 April, with a second date of 3 May, at 2 pm local time,

The 2026 bonds last traded today at 46.88, according to MarketAxess.