Felsberg and Machado Meyer restructure tyre maker’s debts

Felsberg Advogados has helped Brazilian tyre manufacturer Borrachas Vipal restructure some 1 billion reais (US$312 million) worth of debt with seven major banks, extending the company’s debt by five years.

Borrachas Vipal reached a deal with Itaú Unibanco, Banco Bradesco, Banco do Estado do Rio Grande do Sul, Banco de Investimentos Credit Suisse (Brasil), Banco Fator, HSBC, and Banco Santander. The deal was signed on 21 July following six months of negotiations. The banks were represented by Machado, Meyer, Sendacz e Opice Advogados.

The banks agreed to extend the deadline the debt is due to 2020. In return, Borrachas Vipal pledged its 49 per cent stake in Argentine tyre maker Fate as a guarantee for the debt.

The first instalment of Borrachas Vipal’s debt is now not due until the start of 2018, but the company will begin paying interest on the debt at the beginning of 2017. The agreement includes a cash sweep provision, under which the company’s excess free cash flows will be used to pay down the outstanding debt, rather than redistributing it to shareholders.

The company racked up debts following an expansion strategy in Brazil’s boom years, but has experienced declining revenues in the light of Brazil’s current economic recession. One factor adding to Borrachas Vipal’s high indebtedness is a 400 million reais (US$125 million) investment it made in a production facility in Argentina.

The company has three production plants in Brazil, two in Rio Grande do Sul and one in Bahia.

Counsel to Borrachas Vipal

Felsberg Advogados

Partners Pedro Bianchi and João Mendonça, and associates Camila Fernandes Sertori and Renato Brandão

Counsel to Itaú Unibanco, Banco Bradesco, Banco do Estado do Rio Grande do Sul, Banco de Investimentos Credit Suisse (Brasil), Banco Fator, HSBC, and Banco Santander

Machado, Meyer, Sendacz e Opice Advogados

Partners Renato Gomes Ribeiro Maggio and Rafael Capelão Carretero, and associate Rodrigo Chiaverini Albano Pereira.