Heringer presents new plan ahead of creditors meeting

Brazilian fertilizer company Heringer updated its reorganization plan with six proposed alternatives to pay off unsecured debt, ahead of a creditor's meeting tomorrow.

Under the new plan presented 29 November, the company proposes cutting as much as 75pc of the company's R1.5bn ($363mn) unsecured debt, depending on the time frame and the payment option.

The payment may be anticipated in some cases depending on the capital increase that could be obtained by the sale of a controlling stake in Heringer to Russian firms Uralkali and Uralchem. In the previous plan, presented on 18 October, the company proposed just two options for unsecured creditors.

Heringer maintains two payment tranches for the unsecured debt in its first option, with no cut in this case. In tranche A, creditors would receive 50pc of the total debt in 15 years, after a grace period of three years both for principal and interest. For tranche B, there is a five-year grace period and annual payments through 2045.

In the case of a "liquidity event" — which could be the sale to the Russian producers Uralkali and Uralchem among other options — the plan proposes a single payment installment in tranche B. In this case, the cut can vary from a 30pc to 80pc haircut on the 50pc of debt expected to be paid in this tranche, depending on the year that the liquidity event happens.

The second proposed option for unsecured creditors is a single payment with no haircut on 31 December 2040.

In the third option, Heringer again proposes two payment tranches. This alternative is similar to the first one. The difference is that if a liquidity event happens, the highest haircut possible is 20pc.

In option four given by Heringer, of tranche A, corresponding to half of the debt, 30pc of the amount would be paid with a one-year grace period, while in tranche B, 50pc debt would be paid by 2045, with a haircut of 35pc. If the liquidity event happens, the company could anticipate the payment of tranche B, but the haircut would be from 30pc to 80pc of the 50pc debt in this tranche.

Option 5 offers the payment of 60pc of total debt. In tranche A, corresponding to half of the debt, Heringer would have a three-year grace period and repay this half in annual installments by 2034.

Option 6, the last one for unsecured debt, is also split into two tranches and provides for the fastest payment.

At the end of September Russian producers Uralkali and Uralchem agreed in principle to buy 51.5pc of Heringer. The Russian firms had agreed to pay R2/share in a new share issue that would result in a capital increase of up to $110mn. Uralkali and Uralchem agreed to subscribe to any of the new shares not taken up by other firms and will thus invest between $59mn and $115mn.

The new reorganization plan needs to be approved by creditors in a meeting scheduled for tomorrow.

By Kauanna Navarro