Local creditors of Brazilian fertilizer maker Unigel Participacoes are asking the company’s controlling shareholders to provide a cash injection amid talks for a potential covenant waiver, according to people familiar with the matter.
(Bloomberg) — Local creditors of Brazilian fertilizer maker Unigel Participacoes are asking the company’s controlling shareholders to provide a cash injection amid talks for a potential covenant waiver, according to people familiar with the matter.
A capital injection from the billionaire Slezynger family, which owns Unigel through a holding company, is part of a list of demands from a group of local bondholders, said the people, asking not to be named because discussions are private.
The conditions were presented to the company and also include reviewing investment plans, delaying dividend payments and selling non-core assets, they said, adding that it’s unclear whether Unigel will meet the demands.
Unigel declined to comment.
Unigel is poised to breach a covenant on its local bonds as high interest rates at home and lower fertilizer prices globally eroded earnings and sent its leverage ratio skyrocketing. Lending agreements — known as indentures — for the company’s local notes require it to keep the ratio of net debt to adjusted Ebitda below or at 3.5 times, and S&P Global Ratings says it could peak at near 10 times by year-end.
The company will likely breach the covenant with second quarter results, expected to be released in the coming months. Holders will then have to convene to decide on the waiver — though they can grant it before that if they strike a deal with Unigel.
If holders declare the early maturity of the local debt, it would trigger cross-default clauses on its dollar notes due 2026.
Unigel was founded by Henri Slezynger, whose family fortune is valued at around $2 billion, according to calculations by the Bloomberg Billionaires Index. The company, which is being advised by Moelis & Co. on debt talks, is one of the main fertilizer producers in an economy that is 25% agribusiness. It also sells chemicals to industrial customers.
Asset managers that own roughly 80% of the total amount of Unigel’s outstanding local notes agreed to hire a boutique advisory firm for talks with the company.
Unigel’s 2026 dollar bonds, which traded above 90 cents on the dollar until mid-May, currently trade around 30 cents, according to Trace data.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.