Andrade Gutierrez bondholders become restricted for bond exchange negotiations

20 June 2018
 
Andrade Gutierrez bondholders have become restricted in order to begin negotiations for an exchange offer of the company’s past-due USD 345m 4% bond, according to three sources familiar with the matter. Some holders are starting a due diligence process, the first source familiar said.
 
Andrade has been engaged in negotiations with US investment firm Pimco for a USD 540m financing since April, but concerns about the risk of the operation have led to the search for an additional investor to share that risk.
 
Without the additional investor, Pimco is now proposing a financing of around USD 300m to the company, conditioned on an exchange offer with other bondholders, said a source close to the matter.
 
The new bond to be offered could include a haircut and the Pimco loan would be senior to the new bond, according to the source close. The company would need to find the investors and structure this deal with them, the same source added.
 
The parties are waiting for a final decision related to the potential financing from Pimco to begin the bond exchange offer next week or in the beginning of July, said the second source familiar. If Pimco agrees to finance Andrade at a lower amount, the exchange would be partial, the same source said.
 
Bondholders are expecting the company to be able to give them some collateral and offer a higher interest rate, the third source familiar said. “The company is willing to offer what it has available, and it does not want to work with a haircut, to avoid damaging its image in the market,” said the same source.
 
A group of holders has yet to form, nor have any advisors been hired, but the company has started to talk to the main bondholders, the first and the third sources familiar said.
 
Ashmore is one of the funds that became restricted, according to the second and the third sources familiar.
 
“Ashmore has been anchoring the potential exchange offer negotiation,” said the second source.
 
A spokesperson for Andrade Gutierrez and an official at Pimco declined to comment on the matter. A spokesperson for Ashmore did not immediately respond to a request for comment.
 
By Fabiana Lopes, Camila Dias and Aline Lima