Brazil’s troubled fertilizer maker Unigel Participacoes is proposing a two-year halt to all principal and interest payments on its international bonds as it seeks to avoid a looming default, according to a person familiar with the matter.
(Bloomberg) — Brazil’s troubled fertilizer maker Unigel Participacoes is proposing a two-year halt to all principal and interest payments on its international bonds as it seeks to avoid a looming default, according to a person familiar with the matter.
The company is in talks with global bondholders before the existing 30-day grace period on a $23.2 million missed interest payment expires at the end of Nov. 1. The company has $530 million in outstanding dollar notes due in 2026.
If an agreement isn’t reached, Unigel could ask for temporary court protection against creditors, the person said, asking not to be named because the discussions are not public. The company is also proposing a swap of global bonds for notes to be paid in 10 years and in installments, the person said.
“Unigel continues to work to improve its capital structure, a process that includes confidential negotiations with its main creditors,” the company said in a emailed statement to Bloomberg News. “The company believes that the best solution for all stakeholders will be through these negotiations, which are evolving positively.”
In September, a group of local creditors agreed not to take any action that could prompt the early maturity of bonds in Brazil for a period of 90 days, or until the company concludes the restructuring of its local notes, Bloomberg News reported at the time. That period runs out in early December.
While talks are underway, Unigel has postponed the publication of its second-quarter financial results that are likely to show it breached a covenant on local bonds amid an operating downturn. The company’s local notes require it to keep the ratio of net debt to adjusted Ebitda below or at 3.5 times. S&P Global Ratings says it could peak at near 10 times by year-end.
Unigel, founded by Henri Slezynger, is one of the main fertilizer producers in an economy that is 25% agribusiness. It also sells chemicals to industrial customers.
The dollar bonds, which traded near par until May, have sunk to around 35 cents on the dollar since then.
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