AES, BNDES to detail US$1.2bn debt agreement Friday

Brazil's national development bank BNDES and US utility AES reached agreement Tuesday regarding the power company's US$1.2bn debts to the bank and will announce full details on Friday, a BNDES spokesperson told BNamericas. Negotiations have been ongoing since the beginning of the year and foresee the transfer of AES stakes in distributor Eletropaulo and its Brazilian generation subsidiaries AES Tiete and AES Uruguaiana to Novacom, a newly-created holding company. The agreement will likely be a debt-for-equity deal under which, in return for writing off US$600mn debt, BNDES would own 49.9% of Novacom. AES will repay US$515mn over a period of 10-12 years, made through convertible debentures guaranteed by the assets of Eletropaulo, Uruguaiana and Tiete. In the event of non-payment, BNDES would trade in the debentures and take control of the company. The debt agreement is considered important because it allows Brazil's largest power distributor to regain investment capacity and expand operations in the country. For BNDES, the conclusion of the deal before year-end is necessary for it to avoid having to provision for the unpaid loan and post a loss in 2003. Last week, local press reported that BNDES representatives were meeting with electricity regulator Aneel to get permission for the final terms of the debt-for-equity agreement that could give the Brazilian bank 54% of non-voting stock in Novacom and AES the remaining 46%. The proportion of voting stock will reportedly remain unchanged. Additionally, BNDES officials reportedly talked with AES bondholders to explain the debt agreement that transfers AES Tiete shares to Novacom. The Tiete shares are being used as a guarantee for a US$300mn AES bond issue in the US, due 2015. Meanwhile, Eletropaulo said it closed a deal Tuesday with most of the 25 Brazilian and foreign banks to lengthen a 2.3bn reais (US$785mn) debt, most of which is due in 2004-2005. So far creditors holding 91% of the debt have accepted the new terms. The debt will now be due in 2006-2008 in four tranches, with about 30% dollar-denominated and the rest in local currency, AES did not provide information on the size of the tranches and the maturity schedule.