Peter Millard and Cristiani Lucchesi, Bloomberg News
RIO
EnergiesNet.com 05 15 2023
Rio de Janeiro’s electric utility filed for protection from creditors after warning that it was struggling to pay its debts without government authorization to increase tariffs. Its bonds and shares sank.
Light SA, as the holding company for Light is called, filed a request for protection from creditors of 11 billion reais ($2.23 billion) to a Rio de Janeiro court on Friday, according to a regulatory filing.
“The challenges arising from the current economic and financial situation of the company and some of its subsidiaries remain and are getting worse, which demands the urgent adoption of other measures,” the company said in a statement.
Light had said it was being pushed toward default in part because more than one-quarter of the grid load was being lost to theft, costing the company around $200 million a year. The 120-year-old utility had also cited delinquent payments and judicial costs for its debt woes.
The bankruptcy protection will make it more difficult for other Brazilian borrowers to raise money, said Marcelo Godke, a partner at Godke Advogados in Sao Paulo who is a specialist in Brazilian corporate law.
“It’s going to be harder and harder to get loans,” said Godke. “We are going to see a wave of bankruptcy protections.”
The company’s stock sank as much as 19% to 3.76 reais, the biggest intraday drop since March 29.
Light last year posted its worst results since at least 2006 as the economy began to cool, with debt rising due to higher interest rates. The utility recorded a net profit of 107 million reais in the first quarter, reversing a loss posted in the same period last year.
The company supplies energy to 11.6 million people using more than 50,000 miles of transmission lines. It has until June to express interest in negotiating renewal of its concession, starting in 2026, but the filing for protection from creditors may complicate that decision.
Light will protect and maintain services provided within the scope of the concession and will continue “in strict compliance with intrasectoral obligations,” according to the statement.
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Brazil’s power regulator, known as Aneel, said in a statement that it will continue monitoring Light’s financial situation and take necessary measures to guarantee electricity supply in the concession area. Aneel also said that Brazilian law doesn’t allow for bankruptcy protection for the operators of public concessions.
Godke expects Light’s request to go forward anyway because Brazilian courts have become more flexible in recent years, and have accepted similar cases of bankruptcy protection from universities and other organizations with public concessions.
“There’s a good chance the court will accept it,” he said. “It’s going to be a test of Brazilian bankruptcy law.”
— With assistance by Ney Hayashi Cruz, Vanessa Dezem and Julia Leite
bloomberg.com 05 12 2023
