Court frees up AES assets for debt restructuring

A Brazilian court has unblocked frozen assets belonging to US power company AES (NYSE: AES), paving the way for the company to negotiate a debt deal and form a new company with national development bank BNDES, local press reported. A Rio de Janeiro court suspended the bankruptcy of local optic fiber firm Eletronet, owned by AES and Lightpar, a subsidiary of federal power holding Eletrobras. Eletronet was declared bankrupt in May and some AES assets were blocked in Brazil to protect Eletronet creditors. The decision had been an obstacle to the major debt accord between the BNDES and AES agreed in September. AES had defaulted on its US$1.3bn debt to the BNDES, but the two agreed AES would reorganize its holdings in Brazil into a new company called Novacom, which will have BNDES as a partner. The agreement is a debt-for-equity deal under which, in return for writing off US$600mn debt, BNDES will own 49.9% of a new company owning AES's interests in Eletropaulo, as well as generators Uruguaiana and Tiete. Distributor AES Sul will be added to the assets of the new company, provisionally called Newco, once its own financial restructuring is completed. 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 final debt deal has to be signed before December 15, but a court appeal by Eletronet creditors could postpone closing the deal. Other distributors are likely to follow the path of AES debt negotiations with the BNDES. "[Rio de Janeiro distributor] Light has a lot of debt, but not directly with the BNDES. This will make negotiations easier, yet with BNDES participation in debt restructuring other creditors are more likely to agree to the final deal," local bank Sudameris analyst Rosangela Ribeiro told BNamericas.