Legal teams from Kronish Lieb’s Corporate Department successfully completed two large-scale debt restructurings for a pair of Brazilian electric power distribution companies: AES Eletropaulo and AES Cayman Guaiba, Ltd. The deals, in which the Kronish team represented a key member of the lending syndicates, involved the re-profiling or restructuring of $850 million and $300 million of debt, respectively.
The work became necessary after the two power companies faced the negative effects of a combination of forces in Brazil, including the devaluation of the reais, a 2001 energy crisis and political uncertainty. The transactions were complicated by the need to align numerous credit facilities in order to complete the negotiations and to work within a complicated regulatory environment.
The AES Eletropaulo deal involved 35 banks, 13 credit facilities and three syndicates. The Kronish team, which included Steven K. Weinberg, Lynn Horwitz and Zev Bomrind, represented a key syndicate member, WestLB, throughout the lengthy negotiations and documentation and helped to successfully implement a strategy designed to reduce the risk of future currency inconvertibility, as the reais is not freely convertible into dollars.
For the AES Cayman Guaiba debt restructuring, the Kronish Lieb team included Weinberg and Horwitz, who were assisted by Nicholas Smithberg in connection with a number of complex issues relating to political risk insurance for the transaction.
Both deals took over a year to negotiate. During that time, the Kronish Lieb team worked closely with legal teams from White & Case LLP, Kelley Drye & Warren LLP, Sidley Austin Brown & Wood LLP and Shearman & Sterling LLP.