Eletrobras launches consent solicitations for 6 7/8%, 5¾% notes

By Sarah Lizee

Olympia, Wash., Feb. 8 – Brazil’s Centrais Electricas Brasileiras SA (Eletrobras) launched consent solicitations for its $1 billion of 6 7/8% notes due 2019 and $1.75 billion of 5¾% notes due 2021, according to a company announcement.

Eletrobras has put all six of its distribution companies up for auction after its board of directors determined that it should divest its distribution assets and focus on its generation and transmission businesses.

Four of the businesses have been sold, while Amazonas D and Companhia Energetica de Alagoas have recently completed their respective auction processes.

If the control of any distribution company is not transferred by March 31, that distribution company will be liquidated unless the issuer's shareholders extend the deadline.

Accordingly, Eletrobras is requesting for the events of default of the notes to be amended to allow for the liquidation of Amazonas D.

Amazonas D, along with three other distribution companies, entered into agreements with Petroleo Brasileiro SA (Petrobras) to purchase fuel and gas for the production of thermal energy as part of their distribution business. Petrobras provided vendor financing for these purchases, resulting in those four distribution companies owing Petrobras a total of R$15.9 billion as of Nov. 30.

As part of the agreed upon auction process, that debt would be assumed by Eletrobras upon the sale of the distribution companies, and Petrobras has asked Eletrobras to pledge collateral in the total amount of R$13.5 billion as of Nov. 30 with respect to the assigned debt.

As a result, Eletrobras is requesting for the negative pledge in the notes to be amended to allow for the assumption of secured debt owed to Petrobras in order to facilitate the sale of the distribution companies in a manner that would not breach the negative pledge.

In addition, the issuer is proposing to make additional changes to the negative pledge to better reflect its funding environment in Brazil.

In addition, the Brazilian government has proposed to increase the share capital of Eletrobras in order to dilute its voting shares to below 51% of the voting capital of the issuer. Currently, the notes contain an event of default triggered by a change of control. In light of the potential further dilution of the Brazilian government's voting shares, the issuer is proposing to delete this event of default under the 2021 notes and insert a change of control offer to purchase, at 101% of the principal amount of the 2021 notes.

The consent solicitations will expire at noon on Feb. 28.

A meeting for the extraordinary resolution is set for March 4. The quorum will be two or more persons holding or representing a clear majority of the total principal amount of the notes for the time being outstanding.

The extraordinary resolution must be passed by a majority consisting of not less than 75% of the votes cast at the meetings.

If the extraordinary resolution is passed, the issuer will pay in cash on March 7 a consent fee of $3.75 per $1,000 principal amount of 2019 notes and $7.50 per $1,000 principal amount of 2021 notes.

BofA Merrill Lynch (+1 888 292-0070 or +1 646 855-8988) and Banco Bradesco BBI SA (+1 646 432-6643/6642) are solicitation agents. D.F. King & Co., Inc. (+44 20 7920 9700 or eletrobras@dfkingltd.com) is the information and tabulation agent.

Brasilia-based Eletrobras is Brazil’s largest utility company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.