Unigel Participacoes, the Brazilian fertilizer-maker owned by the billionaire Slezynger family, is mulling an asset sale in Mexico to raise cash amid a downturn in operations that sent its bonds into distressed territory, according to people familiar with the matter.
(Bloomberg) — Unigel Participacoes, the Brazilian fertilizer-maker owned by the billionaire Slezynger family, is mulling an asset sale in Mexico to raise cash amid a downturn in operations that sent its bonds into distressed territory, according to people familiar with the matter.
The talks are ongoing and no decision has been made, the people said, asking not to be named because negotiations are private.
The chemicals company was slammed by a combination of a drop in global fertilizer prices and higher borrowing costs at home, and the lower revenue puts it at risk of breaking covenants tied to some of its bonds.
The company recently suspended operations temporarily at two fertilizers plants that it leased from Petroleo Brasileiro SA in northeastern Brazil, while it tries to reduce how much it pays the state-controlled oil producer for natural gas that it uses as a feedstock, the people said.
Unigel declined to comment.
Advisory firms including Laplace Financas and Rothschild & Co. are looking to help Unigel’s local bondholders negotiate with the company, the people said. Laplace and Rothschild declined to comment.
Earlier this month, Fitch Ratings downgraded Unigel to “CCC” after the company announced that it hired Moelis & Co. as adviser to improve its capital structure. It is highly unlikely that the company will receive support from its shareholders or sell its assets quickly enough to raise liquidity, Fitch said.
Unigel’s financial performance is the result of deteriorating market conditions in both chemicals and fertilizers, Fitch said. Its earnings before interest, taxes, depreciation and amortization slumped 82% on year to 104 million reais ($21.4 million) in the first quarter.
Unigel’s bonds, which traded above 90 cents on the dollar until mid-May, sank into distressed territory since. The notes last changed hands at around 36 cents, according to Trace data.
The company was founded by Henri Slezynger, whose family fortune is valued at around $2 billion, according to calculations by the Bloomberg Billionaires Index.
–With assistance from Tarso Veloso, Mariana Durao, Giovanna Bellotti Azevedo and Daniel Cancel.
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