Paranapanema announced, in a material fact released this Tuesday, 12th, the signing of the Partial Settlement Agreement of the Global Agreement, signed in 2017 with 11 financial institutions and subsequently amended.
According to the document, the Partial Settlement Agreement provides for the payment of R$100 million to occur by July 1, 2026, the transfer to creditors of all the amounts already deposited in an escrow account (R$185 million) and the granting to creditors of the full economic benefits resulting from the company’s 9 judicial credit rights (amounts to be received by the company in legal proceedings), which must be monetized within a period of up to three years.
These resources must be centralized in a linked account and distributed among creditors. After compliance with the conditions and expected payments, the agreement provides for the settlement of the debt by R$3.9 billion – which will reduce the debt to R$327.4 million. This balance will be amortized using the resources arising from judicial credit rights that are monetized over the period set out in the agreement. Ultimately, if the remaining amount is not fully settled, the agreement provides that the debt will be considered definitively settled.
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The company highlights, in the document, that it is facing a decade of deep financial crisis and states that the company’s deterioration resulted from the combination of high leverage, strong dependence on working capital, exchange rate volatility and the international price of copper, increased financial costs and low operational cash generation. After severe liquidity difficulties and non-compliance with financial obligations, it entered into judicial recovery.
“The potential settlement of approximately R$4.2 billion of the company’s main financial liabilities represents a transformational event for the company’s capital structure and could substantially alter its ability to continue operating”, says Paranapanema.
