A request made by holders of Unigel Participacoes’ local notes seeking to freeze the Brazilian fertilizer maker’s financial assets was denied by a Sao Paulo judge on Feb. 15, according to a document reviewed by Bloomberg.
The creditors had requested a 30-day freeze of the company’s financial assets and some equity stakes as a temporary protection against creditors expires. Unigel said in a statement that talks with its creditors continue, and that it is confident it will reach an agreement soon.
Prior to the creditor filing, Unigel had pitched a last-minute deal to avoid filing for bankruptcy protection, according to people familiar with the matter. The company was trying to sell bondholders led by Pacific Investment Management Co. on a plan that would include an injection of $100 million in new money and allowing it to restructure debt out of court. Unigel reportedly needs the buy-in of about a third of its bondholders to kick off the restructuring, according to the people.
From there, the company would have 90 days to convince holders of more than 50% of the debt to sign off for the settlement to take effect. The plan under discussion gives bondholders an option to exchange 30% of their existing bonds into senior debt and 40% into subordinated debt, one source said. The remaining 30% of debt would be exchanged into 50% of Unigel’s equity for those creditors who inject new money.
Representatives for Unigel and Pimco declined to comment.
An agreement would mark a turnaround for Unigel, which skipped coupon payments on its dollar and Brazilian real-denominated notes in the past few months as losses piled up due to a global downturn in fertilizer prices. It has failed to keep up with some of its covenants, including maintaining debt levels low enough relative to a measure of earnings.
Late last year, holders of Unigel’s local bonds voted to declare the early maturity of the notes after a 90-day standstill agreement failed to yield a deal. The move triggered an acceleration of the company’s other obligations, and it sought temporary protection from creditors, which expires this week.
The chemical and fertilizer producer is one of the main fertilizer producers in Brazil. It was founded by Henri Slezynger, an 87-year-old Belgian naturalized Brazilian who studied chemical engineering at the Massachusetts Institute of Technology. The Slezynger family owns Unigel through a holding company and its fortune is valued at around $2 billion, according to calculations by the Bloomberg Billionaires Index.