Unigel (RD/D) has offered two options involving new bonds to repay its creditors, with a smaller haircut for those who contribute new money, according to court documents. The restructuring plan provides for a USD 100m capital increase, and creditors will receive a 50% equity stake in exchange for the new money.

The Brazilian chemical firm filed for an extrajudicial debt restructuring with the Second Bankruptcy Court of Sao Paulo late on 20 February, and presented two plans with similar terms (one proposed by Unigel and one by its subsidiaries),

The extrajudicial proceeding has the support of international bondholders holding more than one-third of its BRL 3.306bn (USD 667m) in total debt, according to court documents.

In the plan’s Option A, intended for creditors contributing new money, Unigel offers USD 0.23 or BRL 0.23 in “new restructured notes” for each USD 1.00 or BRL 1.00 of the net amount of claims of the operating subsidiaries, and USD 0.20 or BRL 0.20 for those of Unigel Participacoes. The new restructured notes will pay interest at 12% per year, to be capitalized in the principal amount, or 11% per year, to be paid in cash each quarter, through 31 December 2025. From 1 January 2026 until 31 December 2028, they will pay interest at 11% each quarter. The new restructured notes will be secured by a second-priority lien of Unigel’s shares and over substantially all its assets.

Also in Option A, the company is offering USD 0.25 or BRL 0.25 in “participating notes” for each USD or BRL of the net amount of claims of the operating subsidiaries, and USD 0.29 or BRL 0.29 for those of Unigel Participacoes. The participating notes will mature on 31 December 2044, and will pay interest at 15% per year, with a payment-in-kind (PIK) feature for life. The participating notes will be converted into shares of a new holding company upon the occurrence of certain events.

In Option B, Unigel offers USD 0.09 or BRL 0.09 in new restructured notes for each USD or BRL of the net amount of claims of the operating subsidiaries, and USD 0.11 or BRL 0.11 for those of Unigel Participacoes; and USD 0.15 or BRL 0.15 in participating notes per USD or BRL in net amount of claims of all.

New money terms

The capital raise will involve the issuance of up to USD 100m of “new money senior secured notes” due December 2027 by the new HoldCo (or a finance subsidiary). At the end of the restructuring process, the so-called “financing creditors” will receive a 50% equity stake.

The original supporting creditors – certain holders of Unigel’s USD 530m 8.75% 2026 bonds – will negotiate a backstop agreement with the company of USD 50m, to be entered into within 30 days from the date of the prepackaged filing, in order to ensure the receipt of a fee equal to USD 10m in new money senior notes and 5% of their claims (at par plus accrued) in the form of new restructured notes, according to a term sheet.

The new money will provide cash-flow relief to Unigel and strengthen its capital structure, which is considered essential for the group’s activities, according to the restructuring plan. Proceeds from the sale of Plastiglas in Mexico will be used exclusively to reinforce the debtors’ capital structure. In December 2023, Unigel announced it reached an agreement to sell Plastigas to Verzatec.

The filing of the plans involves Unigel Participacoes, Proquigel Quimica, Companhia Brasileira de Estireno, Unigel Luxembourg and Plastiglas de Mexico. The plans have the support of creditors holding a third of the group’s total debt, the minimum amount necessary to initiate the extrajudicial proceeding. The law then provides a 90-day period for the company to obtain a quorum of 50% plus one to approve the plans. The plans may undergo adjustments, depending on negotiations, according to the filing court document.

On 18 February, a preliminary protection suspending all debt enforcement measures against Unigel expired. In the filing of its extrajudicial plans, the chemical producer has requested the ratification of prohibitions and suspensions of eventual debt enforcements or asset constrictions.

Unigel intends to file for Chapter 15 in the US Bankruptcy Court for the Southern District of New York and ask for the enforcement of the plans when they are approved in Brazil.

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