Lupatech proposes debenture restructuring through split and amendment

By Caroline Salls

Pittsburgh, July 24 – Lupatech SA’s management will propose a debenture restructuring that includes a split and amendment to debenture holders at an Aug. 7 general meeting, according to a proposal released Thursday.

The company said its plan to restructure its financial debt and address its capital and debt structure is designed to allow the group to re-emerge through renegotiation of the debt represented by the perpetual bonds issued by Lupatech Finance Ltd., renegotiation of the debt represented by convertible debentures, the restructuring of part of the financial debt of Lupatech and its subsidiaries in Brazil and the possibility of converting debt to equity.

As previously reported, the company submitted an extrajudicial reorganization plan to holders of the perpetual bonds, which was accepted by bondholders on Feb. 5, ratified by the Brazilian courts on June 6 and recognized by the U.S. Bankruptcy Court for the Southern District of New York on July 14.

To fulfill the condition to the extrajudicial plan, Lupatech’s management will present the debenture restructuring proposal.

Debenture amendment proposal

Under the proposal, the deed of issue will be amended to allow the debentures to be split and divided into two series.

The company said the first series will include 281,805 debentures with a par value of 15% of the value before the split, plus monetary adjustment, conventional interest and other charges.

The second series will include 281,805 debentures, with a par value of 85% of the par value before the split, plus monetary adjustment, conventional interest and other charges.

Lupatech said the principal amount and interest capitalized in the period starting two business days before July 18 and ending two years after that date will be paid on a quarterly basis in 20 installments within a period of five years before the maturity date of the series A debentures.

The series A debentures will be non-convertible. The maturity date will be seven days after the split and amendment date, except for early maturity.

No conventional interest will be paid on the series A debentures for two years before the split and amendment date. That interest will be added to the principal amount and paid quarterly for the last five years preceding the maturity date of the series A debentures.

The series B debentures will mature on the date of split and amendment.

The company will settle the full par value of the series B debentures through the mandatory conversion of those securities on their maturity date at a price of R$0.25 per common share.

Series B debenture holders whose corresponding credits have not been capitalized will be mandatorily converted.

Capital increase

In order to comply with the extrajudicial reorganization plan, Lupatech said its board of directors approved an increase in the capital stock, including the capitalization of the full par value of the outstanding series B debentures whose holders shall sign subscription forms before the end of the period for the exercise of preemptive rights.

The capital increase will also include the capitalization of 85% of the amount resulting from the company’s bonds and up to 100% of the amount held by other creditors.

Lupatech manufactures industrial materials and is based in Caxias do Sul, Brazil. The company filed for bankruptcy on May 23 under Chapter 15 case number is 14-11559.

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