Holders propose restructuring Odebrecht notes, extend by four years

By Susanna Moon

Chicago, March 4 – An ad hoc group holding more than $1 billion of the notes guaranteed by Odebrecht Engenharia e Construcao SA is proposing a restructuring that would extend all of its notes by four years.

The noteholders group is also proposing that the company be allowed to pay all interest on the notes in kind through the end of 2021 at the company's option, to preserve cash.

There would be no reduction in the principal amount of the notes or impairment of the equity interests of Odebrecht SA in the company, according to an announcement by the ad hoc noteholders.

Odebrecht SA would pay a portion of the intercompany debts and other payables owed to the company in order to provide additional liquidity, the ad hoc group added.

The restructuring would also include an enhanced covenant package, including prohibition on dividends and other restricted payments until the notes have been repaid as well as a guarantee from Odebrecht SA and liens on certain assets, including shares of Braskem SA.

The “transaction ... will provide immediate and critical debt relief for the company,” according to the press release by the ad hoc noteholders.

“This proposed solution will allow the company to stabilize its finances, execute its business plan and reestablish itself as a market-leading engineering and construction firm in Latin America and around the world,” the noteholders said.

The ad hoc group said it developed the “proposal after careful review of the company’s now-public business plan, which shows substantial recoveries to backlog and robust cash flows in the coming years.”

“Working within the near-term liquidity constraints outlined in the company’s forecast, the ad hoc group believes its proposal fully addresses the company's liquidity needs and allows the company to pursue its business plan and achieve the robust recovery it projects.”

The ad hoc group is being advised by Davis Polk & Wardwell LLP, Pinheiro Neto Advogados and Rothschild & Co.

Odebrecht is a construction engineering company based in Rio de Janeiro.

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