Light uses ‘fraudulent’ thesis for judicial recovery, says lawyer for debenture holders – 05/12/2023 – Market

Light used a “fraudulent” thesis to resort to the judicial recovery regime and is undermining the credibility it had with the market, assessed to Reuters a lawyer who works in defense of a group of debenture holders of the electric company.

The Light group filed this Friday (12) with a request for judicial recovery in the Justice of Rio de Janeiro, citing debts of around R$ 11 billion.

The request was made to the holding company, since the energy distributor —the main focus of the financial problems— is prevented by law from using this regime.

José Roberto Castro Neves, a lawyer who is working with a group of nearly 30 managers that total more than R$ 4.7 billion in Light debentures, says that the company used “fraudulent gymnastics”.

“Who needs [da recuperação judicial] it is the concessionaire, not the holding company. All this is very strange, deep down the question is ‘what do we have a law for?'”, he said, in an interview with Reuters.

Neves said he was surprised when last month the company obtained an injunction to temporarily suspend its financial obligations – a measure that was heavily criticized by debenture holders –, but said he was confident that “legality will be respected”.

“What we hope, trust, is that the legality is respected. And the legality is certainly that there can be no recovery of a concessionaire, because the law expressly prohibits this.”

Light asked the court that the group’s energy distributor and generator could benefit from part of the effects of the judicial reorganization, in order to prevent the creditors of these companies from receiving their credits “by transverse paths other than the judicial reorganization”.

In the view of the debenture holders’ lawyers, Light’s current position is destroying the company’s credibility in the market.

“This whole story will undermine the most precious thing a company has, which is its credibility in the market. A company of this nature needs credibility, it needs money, and the market needs to believe in it”.

In the view of debenture holders, the ideal path would be a non-forced debt renegotiation and with “responsible management, which plays within the rules and has the trust of creditors”, which is not the case of the current administration, he said.

Neves also stated that the creditors will seek the responsible judge to talk about the case.

“Debenture holders are going to take, use all lawful, morally acceptable means to try to avoid this problem”.

COMPANY DEFENSE

Lawyers representing Light in this case refuted the debenture holders’ accusations, emphasizing that there is no legal impediment for the electricity group’s holding company to file a request and include its subsidiaries.

“The Light holding is the guarantor of all the liabilities of the other (companies), for the holding’s liabilities to be restructured, we need the concessionaires participating in the judicial reorganization”, said to Reuters Thiago Cabral, from Salomão, Kaiuca, Abrahão, Raposo e Cotta Advogados.

The company has been negotiating with financial creditors for months, but the “belligerent” attitude of some of them, mainly the managers, made Light choose not to try to extend the initial mediation for another 30 days, said Rodrigo Cotta, also from Salomão Advogados .

Debenture holders and Light tell contrasting versions regarding the negotiations: the company claims that it sought out the debenture holders and they refused to talk, while the debenture holders say that they were not even called and that no proposal was presented to them.

“The negotiation is taking place yes, it has been taking place and will continue to take place. This even means that this RJ does not start from scratch, we have even skipped some important steps and some important discussions so that the plan (of RJ) is approved in the best way possible,” said Cotta, without going into detail.

Light’s lawyers also stressed that one of the company’s main concerns was the preservation of the public services provided by the company and the maintenance of the electricity sector’s payment chain.

“She made the request from RJ precisely so as not to run that risk. So much so that today, with the amounts she has in her cash, she is able to maintain the provision of the service without entering anything for 12 months. Now, the company’s interest was not even to wait for it to arrive right now,” said Cabral.