Light, the Brazilian distressed power distributor, reached an agreement with its creditors to restructure its debt ahead of its court-supervised creditors meeting, two sources involved said.

For creditors of subsidiary Light Servicos de Eletricidade (SESA), the power distributor, the company offered creditors an eight-year repayment schedule at a spread of 500bps over the IPCA inflation index if they agree to convert 40% of their debt into equity, said a first source close. There will be a 36-month grace period for principal payment but not for interest, said the same source.

For lenders who don’t agree to convert their debt into shares, the repayment schedule is 13 years at IPCA plus 300bps, said the first source. Those creditors will have the same grace for amortization, plus a 12-month grace period for interest payments, the same source added.

Light SESA creditors that convert debt into equity will receive one warrant for every two shares they subscribe, both sources said.  

The parties also agreed to the price at which the conversion will happen, said the second source. Light will do a capital increase subscribed by shareholders that will also be part of the debt-for-equity swap, as reported. Shareholders will inject money at around BRL 2.1 (USD 0.36 at today's exchange rate) per share while the debt will be converted at BRL 4.9 (USD 0.98) per share, the second source added.

The company also agreed to make a partial payment of accrued and unpaid interest, said the first source, adding there will be a formula to set the amount. Both Light SESA and Light Energia, the power generator, are not operating under bankruptcy court supervision, but Light SA, the holdco, is the debtor and the co-guarantor of the operating company’s debt, as reported.

In the case of Light Energia, the debt will not be restructured, with the repayment conditions remaining the same, said the second source. Energia also renegotiated its swaps, said the second source.

Light was able to sign an agreement with bank creditors and debenture holders, said the second source. Holders of Light’s USD 600m 4.375% bond are not part of the agreement but will be able to restructure under the same conditions.

Because Light issued its bonds as units and using two issuers, two-thirds of the bond will be restructured under Light SESA’s conditions and one-third will be repaid under existing conditions, said the second source.

Light will convene lenders on 25 April to vote on its plan of reorganization to restructure BRL 11bn (USD 2.16bn) in debt, as reported.

by Maria Fernanda Blaser and Juliana Rocha, Sao Paulo