Brazil’s USJ extends exchange for 9 7/8% notes, waives one condition

By Susanna Moon

Chicago, May 16 – Brazil’s USJ – Acucar e Alcool SA said it again extended its private exchange in which it is offering newly issued 9 7/8%/12% senior secured pay-in-kind toggle notes due 2021 for its 9 7/8% senior notes due 2019.

The exchange offer will now end at 5 p.m. ET on May 16, extended from 11:59 p.m. ET on May 13. Before that, the exchange was extended from May 6, May 2 and April 18.

The latest extension was made “in order to allow sufficient time to conclude the process of registration and perfection of the collateral securing the new notes,” according to a company notice.

As of 5 p.m. ET on May 13, holders had tendered and delivered consents for $245,696,000 principal amount, or 89.34%, of the existing notes for exchange.

The company said it intends to waive the 90% minimum participation condition, and it has already set aside the condition that holders deliver documentation consenting to an extrajudicial restructuring plan.

Also, the company said it entered into a supplemental indenture to the notes on May 13 for the proposed amendments and, as a result, tendered notes may no longer be withdrawn and consents no longer be revoked.

USJ said on May 3 that it had again amended the exchange offer as a result of a request by holders who “own a substantial portion” of the notes.

As a result, if holders tender between 60% and 90% of the notes, and the company receives corporate approvals and bankruptcy court authorization of the plan, then holders will now receive $750 principal amount of new notes per $1,000 principal amount. In this case, holders will only receive the new notes after the plan is granted by the bankruptcy courts. Originally, they would have received $700 of new notes per $1,000 par amount.

If holders tender for exchange more than 90% of the notes and the offer is completed, they will receive $750 principal amount of newly issued 9 7/8%/12% senior secured PIK notes due 2021 for each $1,000 principal amount. That amount remains unchanged.

The company also will pay accrued interest up to but excluding the settlement date.

More background

As of 5 p.m. ET on May 2, holders had tendered and given consents for $59,653,000 principal amount of the existing notes, compared with $59,453,000 of the notes as of April 25.

On April 12 the company extended the offer from its original expiration of 11:59 p.m. ET on April 11.

Holders had tendered $59,453,000 of notes by the April 18 deadline, up from $57,653,000 as of April 11.

The company amended the terms of the exchange on April 26, saying that it also is seeking approval for an extrajudicial restructuring plan under a potential recuperacao extrajudicial proceeding under the provisions of Brazilian federal law, which subsequently may be submitted to a U.S. bankruptcy court under Chapter 15, as previously reported.

In connection with that, the consent solicitation also included a limited waiver of the bankruptcy event of default provision in the existing notes indenture, solely to permit the company to start proceedings before the bankruptcy courts for confirmation and implementation of the plan by Oct. 31, 2016.

More details

When the offer was announced on March 15, the company said that holders who tendered their notes and delivered their consents before 5 p.m. ET on March 28, the early date, would receive $650 for each $1,000 principal amount of notes accepted for exchange. Those who tendered their notes for exchange after the early deadline would receive $600 per $1,000 principal amount.

The amount of new notes will be issued in minimum denominations of $200,000 and in integral multiples of $1,000 after that and will be rounded down to the nearest $1,000.

In addition to the exchange, the company is also soliciting consents to amend the notes to eliminate substantially all of the restrictive covenants and some events of default.

Holders who tender their notes for exchange must also deliver consents to the proposed amendments.

The exchange offer is conditioned on the tenders of at least 90% of the outstanding notes. The offer and solicitation are also subject to the perfection of the mortgage on the collateral securing the new notes and the receipt of required waivers from some creditors to permit the company to issue the new notes and perfect the mortgage on the collateral securing the new notes, the release noted.

The exchange offer is being made, and the new notes offered, only in the United States to holders who are qualified institutional buyers under Rule 144A or outside the United States to holders who are not U.S. persons under Regulation S.

D.F. King & Co., Inc. (212 269-5550 or 877 283-0318) is the information agent and the exchange agent.

USJ is a Sao Paulo-based producer of sugar and ethanol.

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