SAO PAULO (Reuters) - Creditors of Brazil’s Grupo Rede Energia SA (REDE3.SA), a power distributor seeking to exit bankruptcy protection, approved on Friday a takeover plan by rival Energisa SA ENGI4.SA that would reduce losses on their investments in the company.
The plan, under which Energisa would take control of Rede and revamp it, must be submitted for final approval by the bankruptcy court, Thomas Felsberg, Rede’s lawyer, said. Creditors voted on Energisa’s bid and a bid by CPFL Energia SA and Equatorial Energia SA at an assembly.
Debt-laden Rede Energia has been struggling since energy regulator Aneel seized eight of its units last August in an effort to prevent it from halting electricity service in six states. The units, power distributors in different parts of Brazil, are all experiencing financial and operational problems.
Rede has long been considered a takeover target as the Brazilian government and private companies raise their market share in power distribution. Consolidation is key for power companies to gain financial and operating muscle.
According to a report by consultancy Apsis, Rede’s seized units need investments of about 3 billion reais through 2017.
Energisa offered to pay creditors 1.95 billion reais ($862 million) and pump an additional 1.1 billion reais into the company in the form of fresh investments. The proposal implies that, if approved by the court, creditors will only get the equivalent of 25 percent of their original investments in Rede.
CPFL and Equatorial Energia had offered 1.8 billion reais to pay creditors and inject an additional 773 million reais for investments. The proposal implied an 85 percent discount on payments owed to creditors.
Last year’s decision to seize Rede came after the group’s chairman and largest shareholder, Jorge Queiroz Jr., failed to sell part or all of his 54 percent stake. His stake was once valued at $600 million by some analysts.
($1 = 2.26 Brazilian reais)
Reporting by Anna Flávia Rochas; Additional reporting by Asher Levine; Editing by Guillermo Parra-Bernal and Kenneth Barry