(Bloomberg) – Empresa Electrica Guacolda SA’s bonds jumped the most in more than a month after Grupo WEG said it would meet previous commitments to creditors after acquiring AES Gener’s stake in the coal-fired power producer.
Guacolda’s $ 500 million of overdue banknotes by 2025 rose 3.4 cents on the dollar Friday to 80 cents, according to Trace trade data. The yield decreased to 10.7%, a decrease of approx. 200 basis points from highlights hit this week.
WEG, a Santiago-based investment firm, signed a contract on February 23 to buy 50% of the stake in co-owner AES Gener, a Chilean energy giant selling as part of its plan to reduce carbon emissions. Guacolda operates coal-fired power plants in the Atacama region of northern Chile.
The price of the company’s bonds had fallen due to concerns that the transaction, which requires regulatory approval, would leave bondholders without assurances that WEG would meet certain financial obligations.
Read more: Chile’s coal debt is distressed by the sale of AES shares
However, in an email response to questions Friday, WEG said it will comply with previously signed commitments “including those relating to the bond issued at the time in the North American market.”
Once the sale is complete, WEG said it will also sign the Chilean government’s national coalition agreement and work on developing the plant once the country undergoes an energy conversion process.
“These Guacolda bonds were structured as stand-alone with minimal dividend restrictions, so that means yes, the intentions of the new shareholders are what matters,” said Roger Horn, senior strategist at SMBC Nikko Securities America in New York.
(Adds strategist comment in last paragraph, updates prices in second paragraph.)
For more articles like this, visit us at bloomberg.com
sign up now to stay ahead with the most trusted business news source.
© 2021 Bloomberg LP