Suzano might renegotiate or pay down its bond covenants by 635M reais if the Brazilian currency devaluates further, says company's chief; company plans to sell assets to cut debt, which reached 5.3B reais at end of Q3

Bdebbie Garcia

LOS ANGELES , December 12, 2011 (Industry Intelligence) – Suzano Papel e Celulose SA is consider renegotiating or paying down its bond covenants by 635 million reais (US$351 million), as the Brazilian currency’s devaluation has increased its debt value, said the company’s chief, reported Bloomberg News on Dec. 9.

CEO Antonio Maciel Neto told the media in Sao Paulo that the two alternatives were being considered in case the Brazilian real devalues further. He indicated that the company has “enough cash” to pay the debt, which is the “most expensive” Suzano has.

The Brazilian pulp producer also plans to sell assets to help fund the repayment of some of its debt, which reached 5.3 billion reais at the end of the third quarter, according to Suzano’s financial statements, Bloomberg reported.

The company would like to bring the debt down to 3.5 times earnings before interest, taxes, depreciation and amortization (EBITDA). Its bond covenant requires that the debt remain below 4 times EBITDA, a level Suzano surpassed in the third quarter due to the further weakening of the local currency.

If Suzano exceeds the level again, it risks breaching the bond covenant. Last quarter, Brazil’s currency fell 17%, which is the worst performance of the world’s 16 most-traded currencies, reported Bloomberg.

The primary source of this article is Bloomberg News, New York, New York, on Dec. 9, 2011.

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