Brazil’s Light Nears ‘Critical Point’ After Huge Loss: Analysts

Published 29 March 2023, 12:18:24.229 GMT

(Bloomberg) -- Bonds and shares of Brazil’s troubled power company Light SA may be in focus on Wednesday after the firm unveiled a 5.5 billion-real net loss for the fourth quarter, much wider than Wall Street had expected. 

Part of the big miss was explained by Light’s decision to book provisions related to the return of PIS and Cofins tax credits to consumers. The earnings call starts at 11:00 a.m. local time, with investors likely to focus on the renewal of its distribution unit’s concession and debt-restructuring talks. 

Here’s what analysts are saying about Light:

* JPMorgan (underweight rating for shares)

** Net loss for the year was “staggering,” but Light’s decision to make adjustments regarding tax credits was welcomed as other peers had already done the same

** Big net loss “underscores that Light is reaching a critical point in which it has to settle the future of its concession” with the government, the regulator and debtholders

** An early extension of its distribution unit’s Rio de Janeiro concession and debt restructuring could pave the way for a takeover

* Lucror Analytics

** Cash burn in fourth quarter was likely mostly related to the payment of short-term debt

** Talks with creditors could be complex if there’s no evidence that its unit’s concession renewal will occur beforehand

** “The announcement of a restructuring process, the complexity of the negotiations and potential forced selling for investors which do not pursue an exchange could further pressure the notes from the already distressed levels”

By Vinicius Andrade