Light goes to court not to pay debts – 04/11/2023 – Market

Grupo Light, which controls the energy distributor of the same name in Rio de Janeiro and was already having financial problems, filed a lawsuit in an attempt to suspend payment of part of its debts and initiate a collective mediation procedure with creditors.

The information was disclosed by the company in a statement to the market this Tuesday (11). Light used the precautionary measure instrument, in the Justice of Rio, on Monday (10), and requested that the demand remain confidential and be attended to urgently.

In the communiqué, Light does not inform the creditors who are targets of the injunction, but according to the Sheet found out from people in the market, large banks, investment funds, as well as companies that operate with securitization and also with their debentures are the main targets of demand.

In a note, the company confirms that the measure does not affect operations with suppliers and employees.

Lawyers who accompany the energy sector believe that the request for renegotiation of debts tends to evolve into a judicial recovery.

In a note sent to Sheet via press office, Light claims that the claimed court negotiation is provided for in the Brazilian Civil Procedure Code and that the use of the instrument seeks to build a long-term solution for the company

“Light’s objective is to guarantee the preservation of its operations, in particular the electricity distribution concession in the State of Rio de Janeiro, through the temporary suspension of payment of financial debts”, states the text.

“The group understands that judicial mediation is the fairest and most equitable way to deal with all these creditors due to the characteristics of their indebtedness, mostly formed by debentures and bonds, today in the hands of investment funds and individual investors.”

Light reinforces that all payments of its financial obligations held by the creditors in question are up to date on today’s date.

The company appeals to Justice after having started, last month, conversations with creditors to renegotiate debts, with the argument of improving the capital structure and preserving its cash.

Light is responsible for distributing energy to 31 municipalities in Rio de Janeiro and faces a serious economic and financial imbalance. The main problem is combating energy theft, which has affected the company’s results for years.

The situation has worsened this year, as the maturity of a significant part of the debts approaches and the future of the distribution concession, which expires in mid-2026, remains unresolved.

change in command

Due to financial difficulties, the company announced, in early April, a restructuring of the executive board, with the resignation of its CEO.

In office since August 2022, Octavio Pereira Lopes presented, on April 4, a letter of resignation from two of the company’s energy generation and distribution subsidiaries, according to minutes of the meeting of the board of directors released by the company on the 5th.

In his place, Alexandre Nogueira Ferreira, who was already a member of the company’s executive board, took over to fulfill the remainder of the term, scheduled to end on August 31, 2024.

After the statements about the renegotiation of debts, risk rating agencies again reduced the company’s credit rating. Fitch considered that Light’s access to financing is “limited and/or very costly” due to current market conditions and its credit profile.

Moody’s said on Friday (7) that the Light’s new rating, Caa3, implies a high probability of default with an average recovery rate for borrowers between 65% and 80%.