Tuesday, March 26, 2013

Bondholders Unlikely To Derail Brazil's Grupo Rede Takeover Plan


Wed., March 27, 2013
Opposition from foreign bondholders is unlikely to stop the takeover of Brazilian power holding company Grupo Rede Energia SA by two rivals, several sources with direct knowledge of the situation told Reuters. The process should be concluded ahead of a court-mandated deadline in July, and the buyout plan by Equatorial Energia SA and CPFL Energia SA may help limit losses for bondholders, the sources said. But bondholders are fighting a proposal that would restructure Grupo Rede's debt and cut the value of their holdings by 85 percent. Cash-strapped Grupo Rede, which has 4.4 billion reais ($2.2 billion) in debts, has been struggling since energy regulator Aneel seized eight of its units in August in an effort to prevent it from halting electricity service in six states. The units, power distributors in different parts of Brazil, are all suffering from serious financial and operational problems. Equatorial and CPFL are in the process of acquiring Grupo Rede for the symbolic price of 1 real ($0.49) plus assumed debt. They have the exclusive right to conduct takeover talks with the government and Grupo Rede's creditors. This exclusivity has prevented rivals Energisa SA and Copel, as Cia Paranaense de Energia SA is known, from presenting formal bids, though they have made a preliminary proposal. 

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