Tonon exchanges notes to kick-start refinancing plan
Tuesday, 30 June 2015 (8 hours ago) by Toby Luckhurst
Brazilian firm Felsberg Advogados has helped Brazilian sugar, ethanol, and energy company Tonon Bioenergia restructure US$300 million worth of its debts and obtain US$70 million in new financing, on the condition the company completes a debt exchange offer.
Cleary Gottlieb Steen & Hamilton LLP in New York and São Paulo and Brazilian firm Stocche Forbes Advogados advised the bondholders, including Gramercy Fund Management. It is thought that Davis Polk & Wardwell LLP also advised Tonon, but this could not be confirmed before publication. Gramercy is leading a contingent of bondholders who have agreed to supply Tonon with US$70 million worth of new funding if it agrees a lower interest rate debt swap with creditors of US$300 worth of its debts.
Tonon made its debt exchange offer through its subsidiary Tonon Luxembourg on 13 June. It offered to exchange all outstanding 9.25 per cent interest notes due in 2020 from a US$300 million issuance it made in January 2014, with new notes also due in 2020 but set at a lower interest rate of 7.25 per cent until January 2017. After January 2017 the new notes’ interest rate will increase to the same rate as the old notes’.
Prior to the offering, 80 per cent of noteholders entered a “lock-up” agreement with Tonon, where they agreed to participate in the exchange. However, for Tonon to skirt bankruptcy, at least 95 per cent of existing notes must be exchanged. The expiration date for the exchange offer is 13 July.
On completion of the exchange offer, a group of lenders led by Gramercy will provide a US$70 million loan to Tonon to repay short-term debt and for working capital. The loan will be secured by a mortgage over two sugar mills run by Tonon in Vista Alegre and Santa Cândida, as well as a lien over equipment in both mills, which are located in the states of Mato Grosso and São Paulo respectively. The loan will mature in May 2019, and is set at 12 per cent interest.
Tonon is due to make a US$14 million interest payment on the notes on 24 July. In May Tonon missed a US$12 million interest payment on a different series of notes worth US$230 million that were issued in May 2014. It managed to arrange the exchange offer within a 30-day grace period after missing the payment.
Tonon’s financial problems come just two years after the company bought sugar cane cultivator Paraíso Bioenergia in March 2013, boosting its sugar grinding capacity by 50 per cent. Motta, Fernandes Rocha – Advogados advised Tonon, while Paraíso hired Costa, Waisberg e Tavares Pes Sociedade de Advogados for the deal.
Tonon is not the only Brazilian sugar company to face financial difficulties in recent years, as the sector grapples with falling sugar prices, drought and a cap on domestic ethanol prices. In January, sugar and ethanol producer Aralco won approval for a US$350 million restructuring plan, 11 months after it filed for bankruptcy protection. Dias Carneiro, Arystóbulo, Flores, Sanches and Thomaz Bastos Advogados advised Aralco, while Felsberg Advogados advised the bondholders and Pinheiro Neto Advogados the banks.
Counsel to Tonon
Partners Paulo Campana and Thomas Felsberg and associate Pedro Bianchi in São Paulo
Counsel to the bondholders and Gramercy
Cleary Gottlieb Steen & Hamilton LLP
Partner Richard Cooper and associates Daniel Rainer and Grace Armstrong in New York, and partner Francisco Cestero and associate Jesse Mosier in São Paulo
Partners Marcos Leite de Castro and Paulo Padis and associate Yves Dutra in São Paulo.
Latin Lawyer on-line em 30.6.2015.