89
89

Soares da Costa’s Restructuring Plan Proposes 50% Reduction in Debt to Creditors

15 November 2017

Soares da Costa proposes to cut its debt of 700 million euros in half. The Portuguese state and the company’s employees would avoid any losses. The operation in Mozambique will be sold, generating €20 million.

Six months from the celebrating 100 years of the construction company’s existence, Soares da Costa’s (SdC) board presented the latest version of its Special Plan to Revitalize (PER), revising faults that a judge at the Gaia Commerce Court had considered damaging to the principle of equality among creditors.

Portuguese and Angolan creditor banks and the company’s suppliers are expected to forgive half of the firm’s outstanding debt, to enable the construction company to survive. What is left over will be paid out over 18 years.

Debts to employees (over €4 million) and the Portuguese state will be paid in full, in annual instalments.

In the case of banks, there is another 15% of the debt that is dependent on profits generated by the construction group, with payment to be fulfilled in a lump sum after the 18-year period, the time horizon of the financial restructuring. The construction company expects to return profits by 2020.

700 million in debts

Overdue debts total €700 million, with Caixa Geral de Depósitos (CGD) accounting for the most significant share – €160 million. BCP and Bankinter are other relevant bank creditors on the Portuguese side, while Banco Millennium Atlântico is the main Angolan creditor (74 million euros), which also has guarantees on assets. SdC chose BMA to be its partner and financer in the recuperation program.

In the previous version of the PER, euro-denominated bank debts suffered a cut of 60%, while liabilities in kwanzas (the Angolan currency) sustained a reduction of just 35%. In the case of suppliers, the debt in Angolan currency was not affected.

Convincing CGD

That SdC’s first PER was not approved was in part due to a vote against the plan by its principal creditor, CGD. This time, the company’s board believes that CGD will vote favourably.

The board “underwent intense negotiations with the primary creditors, welcomed suggestions and is convinced that it is on the right track,” Joaquim Fitas, CEO of SdC, stated. A vote in the PER will be held on November 27.

Joaquim Fitas is leading a buyout operation by SdC SGPS’s staff that will mark the departure of the firm from António Mosquito’s larger construction group.

Sale of the unit in Mozambique

The new version of the plan also welcomes news on the financing of the restructuring of the construction company.

This time, the BMA will only finance 15 million euros (vs 45 million euros in the previous proposal), with a capital injection of 20 million euros from the sale of the Mozambique operation and 1.2 million euros from the sale of assets in Portugal.

In Mozambique, SdC has already agreed to divest its operations in the country. The deal is expected to be finalised within the next few days.

In the plan’s defence, the board contends that a bankruptcy would be less favourable to creditors as they would be limited to revenues generating from the liquidation of the company’s assets.

If the creditors approve the PER, the SdC will gain a second lease on life, allowing it to start its next one hundred years afresh.

Original Story: Expresso – Abílio Ferreira

Translation: Richard Turner