Andrade Gutierrez bondholders in talks with legal advisors for possible bond exchange

05 July 2018
 
Certain holders of Andrade Gutierrez Engenharia’s past-due USD 344m 4% 2018 bonds have been in talks with law firms ahead of a potential bond exchange offer, according to three sources familiar with the matter.

After an expected financing package from Pimco has become increasingly difficult to close, the Brazilian builder has been discussing an exchange with bondholders, featuring a three-year maturity extension with no haircut.

So far, holders have not hired any law firm, according to the first source. Conversations with potential financial advisors have not started yet, the second source familiar said.

The conversations with law firms are only preliminary, and bondholders still have not made fully clear what kind of demands they might request of Andrade, the third source familiar said.

So far, bondholders have signaled a desire to be paid a portion of almost 30% of the outstanding debt, and also to obtain a portion of Andrade’s stake in the infrastructure concession company CCR as a guarantee, as reported.

In the background, there is also the possibility that Andrade will eventually need to attempt an extrajudicial recovery process, the first source said. In this case, the company’s proposal would need to be approved by at least 60% of bondholders.

“I am skeptical about the chances of an exchange offer without fresh money,” the first source said, noting that a deal with Pimco is still not completely out of the question.

“It is impossible for the company to continue without new money, even if the exchange offer works out,” said a fourth source familiar, noting that in three years, when the bonds from an exchange offer would expire, the company will not be totally recovered from its financial crisis as it needs to add new backlog.

A spokesperson at Andrade Gutierrez did not immediately respond to a request for comment.
 
By Fabiana Lopes and Aline Lima