Restructuring Deal of the Year 2012: A brief window of opportunity
It was the first, the last and the only restructuring of a public utility in Brazil, made possible through a brief window of opportunity in the country’s legislation. Struggling energy company Celpa successfully restructured its debt, sidestepping a government attempt to block public utility concessionaires from undergoing judicial restructuring proceedings along the way
There was a lot at stake when, in 2011, the market found out Centrais Elétricas do Pará (Celpa), the energy company serving the state of Pará – one of the largest territories in Brazil – was experiencing financial difficulty and was part of a group of companies put up for sale by its parent, Rede. With some US$1.2 billion in debt, a restructuring was deemed the only way Celpa could keep the lights on in Pará.
By February 2012, Celpa was forced to file for voluntary bankruptcy protection and did so with the help of Felsberg, Pedretti e Mannrich Advogados, a firm it chose because of its recurrent roles in a number of Brazil’s high-profile restructurings and Felsberg’s experience drafting the country’s 2005 bankruptcy law. Lilla, Huck, Otranto, Camargo Advogados was brought on-board by Celpa to assist in litigating against creditors.
In writing up the reorganisation plan, the lawyers had to accommodate a host of national and international secured and unsecured creditors, including the Inter-American Development Bank, the Bank of America Merrill Lynch, an ad hoc committee of bondholders and local creditor Petrobras Distribuidora, a fuel supplier to Celpa that was seeing the size of its credit increase on a daily basis.
The deal met with an unexpected snag when, two days before Celpa was due to meet with its creditors, the Brazilian government introduced new legislation that stopped public utility concessionaires from undergoing judicial restructuring proceedings, which Brazil’s electricity regulator, ANEEL, used to try to halt the process. However, the Pará bankruptcy court barred ANEEL’s move on grounds of unconstitutionality as the reorganisation was already in place, giving the green light for the process to continue.
And so, on 1 September, the restructuring plan was presented, and after many hours of negotiations, the parties reached an agreement that was subsequently approved by the bankruptcy court and allowed for an investor to participate in the restructuring and inject at least US$300 million in the company. That investor was Equatorial Energia.
The lawyers then turned their attention to the US. After negotiating Equatorial’s acquisition of Celpa’s debt, which included a US bond, Equatorial’s US counsel, Shearman & Sterling LLP, filed for Chapter 15 before the US courts on behalf of the struggling electricity company.
Once everything was in place, Celpa and Equatorial executed the share purchase agreement, where Equatorial bought 61.37 per cent of Celpa for the symbolic price of one real, while taking on approximately US$950 million of restructured debt, to complete what is said to be the largest-ever restructuring proceeding since the enactment of Brazil’s new bankruptcy and restructuring law in 2005. But the new legislation introduced in response to Celpa’s financial woes means that restructurings of public utilities concessionaires without prior government intervention is no longer possible, making Celpa’s restructuring a truly first and last one of its kind.
Counsel to Celpa
Partners Thomas Benes Felsberg, Joel Luís Thomaz Bastos, Bruno Kurzweil de Oliveira and Paulo Fernando Campana Filho
Lilla, Huck, Otranto, Camargo Advogados
Partners Raquel Maria Sarno Otranto Colangelo, Rogério Carmona Bianco, Luis Gustavo Haddad, Luiz Felipe Pereira Gomes Lopes and Bruno Robert
Counsel to Equatorial Energia
Partners Eduardo Secchi Munhoz, Marcelo Sampaio Góes Ricupero, Andrea Bazzo Lauletta and Flavio Mifano
Partners Robert Ellison, J Mathias von Bernuth* and Douglas Bartner
* He has since moved to Skadden, Arps, Slate, Meagher & Flom LLP
Counsel to the ad hoc committee of bondholders
Bingham McCutchen LLP
Partner Tim DeSieno
Pinheiro Neto Advogados
Partner Giuliano Colombo
Counsel to Petrobrás Distribuidora
Partner Gláucia Mara Coelho
Counsel to the Inter-American Development Bank
Chief counsel H Rosemary Jeronimides and project attorney Krysia Avila de Oliveira
Andrews Kurth LLP
Partners Vera Rechsteiner, Eric Markus, Doris RodrÍguez, Jonathan Levine and Joe Patella
Pinheiro Neto Advogados
Partners Luiz Fernando Valente de Paiva and Diógenes Mendes Gonçalves Neto
Counsel to Bank of New York Mellon
Chadbourne & Parke LLP
Partners Marian Baldwin Fuerst and Charles Johnson
Partner Leonardo Morato
Counsel to Bank of America Merrill Lynch
Partners Fábio Rosas
The runners-up in the restructuring category include:
Counsel to Cemex
General counsel Ramiro Villarreal and senior corporate counsel Roger Saldaña
Slaughter & May
Skadden, Arps, Slate, Meagher & Flom LLP
Matheson Ormsby Prentice
Liskow & Lewis
Counsel to HSBC, Bank of America, The Royal Bank of Scotland, BNP Paribas, Citi, BBVA, Banco Santander and JPMorgan
Cleary Gottlieb Steen & Hamilton LLP (joint lead counsel)
Clifford Chance LLP (joint lead counsel)
Bär & Karrer
Counsel to Urupanel
Independent practitioner – Rafael Tejera
Counsel to Cotopaxi
Counsel to DEG
Counsel to BBVA
Counsel to HSBC
Counsel to Banco Itaú
Counsel to Nuevo Banco Comercial
In-house counsel – Julio Carbone